Federal Tax

Entertainment, Meals, Gifts and Lodging — Deduction and Recordkeeping Requirements (Portfolio 520)

  • This Portfolio explains the rules for deducting business entertainment, gift, and meal costs and for excluding from an employee’s income meals and lodging provided by the employer.


Bloomberg Tax Portfolio, Entertainment, Meals, Gifts and Lodging — Deduction and Recordkeeping Requirements, No. 520, explains the substantive and procedural rules for deducting the costs of business entertainment, gifts and meals, and for excluding from an employee’s income the value of meals and lodging provided by the employer. This Portfolio contains an exhaustive analysis of the limitations imposed by §162 and 274, as well as by other relevant statutory, regulatory, and case law limitations, on deductions for the costs of entertainment and gifts, as well as expenses for meals and unreimbursed employee business expenses. This Portfolio also analyzes the problems which arise in the context of determining whether a particular expense is a personal or business expenditure and whether an expense is deductible by the employer or by the employee incurring the cost. Additionally, this Portfolio discusses the impact of tax withholding on business expenses.

Finally, because it is imperative that the taxpayer claiming the deduction of an expense be capable of substantiating the various elements of the expense, this Portfolio discusses in detail all relevant recordkeeping and reporting requirements.
A detailed examination is also made of §119, under which an employee may exclude from income certain meals or lodging provided by the employer. This discussion includes the requirements the employee must meet to qualify for the exclusion, and those the employer must meet to claim a business expense deduction for the cost of the meals or lodging, and the tax withholding requirements that pertain to those items. Finally, statutory and regulatory provisions other than §119 permitting the exclusion of meals and lodging are discussed. The information and analysis in this Portfolio will assist the practitioner or business person in ensuring that all the requirements for deductibility are met. This is vital because, unless strict attention is paid to the requirements of the statute and regulations, the employer and the employee may both lose the benefit of otherwise allowable deductions.

Table of Contents

I. Expenditures for Business Entertainment and Meals, Entertainment Facilities and Club Dues
II. Substantiation, Reporting and Recordkeeping Requirements Relating to Expenses for Entertainment, Meals and Entertainment Facilities
III. Business Gifts
IV. Meals or Lodging Furnished to an Employee

Ira Stechel