Adds two new examples addressing meals provided during business meetings at a hotel:Įxample 3.Therefore, the examples were revised to remove any discussion of business purpose from the facts of the example. The examples now assume that the expenses are otherwise deductible as ordinary and necessary under section 162. Clarifies the proposed regulations to provide that the meal expenses must be an ordinary and necessary expense under section 162(a) and that these regulations provide guidance only under section 274 (i.e., they are not intended to provide guidance under section 162).
#K and n food professional
Provides that the food and beverages must be provided to the taxpayer or a business associate, which incorporates the definition as a “a person with whom the taxpayer could reasonably expect to engage or deal in the active conduct of the taxpayer’s trade or business such as the taxpayer’s customer, client, supplier, employee, agent, partner, or professional adviser.” Such individual can be a business associate whether the relationship is established or prospective.Incorporates other statutory requirements taxpayers must meet to deduct 50% of an otherwise allowable business meal expense-specifically, the expense must not be lavish or extravagant under the circumstances and the taxpayer, or an employee of the taxpayer, must be present at the furnishing of the food or beverages.Substantially incorporates the proposed regulations addressing business meals provided during or at an entertainment activity.These food and beverage expense amounts are subject to the 50% deduction disallowance but are not treated as a nondeductible entertainment expense.Ĭoncerning business meal expenses, the final regulations add a new Reg. Includes examples regarding food and beverages that are either (1) purchased separately at an entertainment event or (2) separately stated on an invoice and the stated cost of the food and beverages reflects the venue’s usual selling price if purchased separately.Provides that the amount charged for food or beverages on a bill, invoice or receipt must reflect the venue’s usual selling cost for those items if they were to be purchased separately from the entertainment or must approximate the reasonable value of those items.Provides that unless food or beverages provided at or during an entertainment activity are purchased separately from the entertainment, or the cost of the food or beverages is stated separately from the cost of the entertainment on one or more bills, invoices or receipts, no allocation can be made and the entire amount is a nondeductible entertainment expenditure.Distinguishes between entertainment expenditures and food or beverage expenses in the context of business meals provided at or during an entertainment activity.In addition, the final regulations retain the guidance in the proposed regulations that: Separately stated food or beverages, not entertainment Provides that for purposes of section 274(a), the term “entertainment” does not include food or beverages unless the food or beverages are provided at or during an entertainment activity and the costs of the food or beverages are not separately purchased nor separately stated from the entertainment costs.Confirms that the nine exceptions in section 274(e) continue to apply to entertainment expenditures for which a deduction is otherwise disallowed under section 274(a).section 1.274-2(b)(1) (including use of an “objective test”), with minor modifications to remove outdated language.
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