Is this meal deductible?
It really depends on the purpose for the meeting. A company that has an office Christmas party where all employees are invited, whether or not all attend, is 100% deductible.However, an event that's main purpose is entertainment oriented and "discrimintates" on who attends is only 50% deductible.The fact that the restaurant does not charge a fee for using their room provided a $ minimum is spent really is of no consequence.It is similar to professional continuing education ("CPE") held at a hotel. The session fee is typically inclusive of lunch, and the fee paid by the education provider for utilization of the facility is 100% deductible as well.It would appear that your situation resembles the CPE situation and would be 100% deductible, however, the cost needs to be in line with the sales revenue generated as well, since a profit motivation for the enterprise needs to exist.........I would say the meal is 50% deductible as it is in conjunction with a business purpose (the Tupperware sales) and the meal is eaten immediately before, during, or after the business portion of the evening; but not 100% deductible, as would be the employee party or any other meal provided by the employer for the convenience of the employer.
See entire conversation:
Is this meal deductible?
| 3 | Besides doing taxes I have recently started selling Tupperware. We do some combined parties at local restaurants. These restaurants do not charge a fee for the room but do require a certain amount of food purchased. We usually buy dinner there. My friend said her tax guy told her she could not deduct the cost of the food. As the food is required by the restaurant it is in essence the fee charged.deductionasked 31 Oct '09, 21:26 Cathi261●1●5 accept rate: 0%Please see Cathi's additional information below in "answer format" with the additional comments.(15 Nov '09, 21:15)Brent Berkman |
9 Answers:oldestnewestmost voted
| 3 | If you are only paying for your own food, it is not allowable.If you are paying for meals for all and it is open to the public it may be 100% allowable.If you are paying for meals for invited guests only it would be subject to the 50% limit.I was a Tax Auditor/Tax Compliance Officer with IRS for many years and occasionally audited similar issues.linkanswered 01 Nov '09, 20:38 Toni McIntyr...980●1●9 accept rate: 5%The facts do not specify, but I would think it is a reasonable assumption that the food is available during the business of getting sales orders, and is therefore incidental to the business process. Yes, it appears that it is open to the general public because the more customers that attend, the more sales that are generated, otherwise there is a "profit motive" issue.(01 Nov '09, 21:57)Brent Berkman |
| 2 | It appears that you each are purchasing your own food. The IRS might question whether it was truly a valid business expense. I think you are likely on "thin ice" here, but as long as you keep contemporaneous written records, along with your receipt, it might be deductible. Keep in mind that in any event, only 50% is ultimately deductible.linkanswered 02 Nov '09, 00:45 Jeff K21●1 accept rate: 0%1The question does not indicate that each person is purchasing food. It appears that the food is purchased incidentally to the sales activity that is transpiring which is the sole purpose for utilzing the restaurant establishment(02 Nov '09, 01:21)Brent Berkman |
| 2 | Original answer:Ask if you can just pay them the amount of money that the food would cost if you did buy it, without actually receiving any food. Since they probably want the money more than they want to get rid of the excess food, this should not be a problem. If you pay money to use the space without receiving food in return, then you should be able to deduct it.If you receive the space for free when you buy food, and no deduction would otherwise be allowed for the food, then no deduction is allowed. The IRS gives an example involving someone who pays for an airline ticket for personal travel and later uses the frequent flier miles to purchase an airline ticket for business travel. No deduction is allowed for either airline ticket, because the first was used for non-business purposes and no money was used to purchase the second.Clarification resulting from Sandy Sea's response:I am not suggesting that they recharacterize a payment that happened in the past. I am suggesting what they should do in the future if they use the same facility again.linkanswered 07 Nov '09, 00:10 stephenweins...1.5k●2●12 accept rate: 1%edited 15 Nov '09, 20:42It still appears the the main business for the event is the selling and order taking activity by all the vendors in a meeting room with the food incidental to the sales activity. How much different is this than CPAs or attorneys attending a continuing education session at a hotel facility with lunch that is provided?(07 Nov '09, 00:49)Brent BerkmanStephen? Are you asking if they can "change" the face of the fees? No fees for use, no deduction; so now to change it to make it deductible seems like fraud to me...imho(07 Nov '09, 21:43)SandySeaHave you seen Cathi's additional comments phrased as "answers" below? (It is currently just above AJ's answer as it only has 1 vote.) Based upon her "additional information" the food is most likley not deductible, but then in my additional comment is a suggestion for how to structure "future meetings" so the food may be 100% deductible depending on a cost / benefit analysis.(15 Nov '09, 21:12)Brent Berkman |
| 1 | I don't see a business use for the meals at all. You are not out of your tax home, and you are choosing to eat there. Pay the room fee and that will be deductible. I definitely agree with your friend's "tax guy".Helen, EA in PAAdditional - she says NOTHING about the party attendees eating there. And if they are not eating there, I don't see how she can claim any deduction.linkanswered 31 Oct '09, 21:35 Helen EA in PA1.8k●2●4 accept rate: 4%edited 31 Oct '09, 23:44Tuppwerware "parties" can be held in outside of the home. Maybe the "home" is too small for the # of customers attending?(31 Oct '09, 21:39)Brent Berkman1Instead of having one host in one home we will have a multi host party at one location. This creates a much higher revenue than one smaller party. We do not have an office location to hold parties at so they are always at a home or an offsite location. I can easily earn $200 a night.(31 Oct '09, 21:46)CathiCathi, As I alluded to below for your other comment, this rather confirms what I suspected and do not see why the food costs would not be deductible at 100% as it's not entertainment related, but resembles the continuing education session example in my original answer.(31 Oct '09, 22:32)Brent BerkmanHelen, in my familiarity with "parties" that take sales orders, part of the event involves serving refreshments, etc to everyone. Cathi, can you confirm that the food is indeed for the attendees as well?(31 Oct '09, 23:59)Brent BerkmanI tend to agree with Helen here. The reason business meals are 50% deductible is that you are not entitled to your own deduction for food, we all have to eat so our own meals are not deductible. If she is serving everyone however, I would say 50% is deductible if she is paying for that service to them. She says WE usually buy dinner there...so is she or is she not buying for more than one?(01 Nov '09, 13:21)SandySeashowing 5 of 6 show all |
| 1 | It really depends on the purpose for the meeting. A company that has an office Christmas party where all employees are invited, whether or not all attend, is 100% deductible.However, an event that's main purpose is entertainment oriented and "discrimintates" on who attends is only 50% deductible.The fact that the restaurant does not charge a fee for using their room provided a $ minimum is spent really is of no consequence.It is similar to professional continuing education ("CPE") held at a hotel. The session fee is typically inclusive of lunch, and the fee paid by the education provider for utilization of the facility is 100% deductible as well.It would appear that your situation resembles the CPE situation and would be 100% deductible, however, the cost needs to be in line with the sales revenue generated as well, since a profit motivation for the enterprise needs to exist.linkanswered 31 Oct '09, 21:36 Brent Berkman3.1k●3●11 accept rate: 13%Tupperware parties are where business is transacted. There is no office location for a party. I can easliy generated $200 a night at one of these events.(31 Oct '09, 21:48)CathiI understand, and you're utilizing a restaurant instead of a home to have a greater # of "customers" attend.(31 Oct '09, 22:29)Brent Berkman |
| 1 | I would say the meal is 50% deductible as it is in conjunction with a business purpose (the Tupperware sales) and the meal is eaten immediately before, during, or after the business portion of the evening; but not 100% deductible, as would be the employee party or any other meal provided by the employer for the convenience of the employer.linkanswered 31 Oct '09, 23:16 cpaboise914●1●6 accept rate: 1%At "parties" such as these, the food is more like appetizer and buffet style and most likely incidental to the event's main business purpose of sales orders. Otherwise, I would agree with you.(31 Oct '09, 23:55)Brent Berkman1Yes, Brent, this is true - usually these "parties" have buffet style appetizer food provided by the host(s) that is incedental, and attributable to marketing the sales meeting or to other meeting costs (in lieu of room rent). But Cathi specifically mentioned that "we buy dinner", which I read to mean full meal; and in this case, I would err on the side of caution as to the deductibility, as these types of parties (to my knowledge) are usually held for invited guests and not open to the general public.(04 Nov '09, 19:10)cpaboiseHowever, without further clarification from the taxpayer, "we buy dinner" is a rather "generic innocuous phrase".(15 Nov '09, 21:04)Brent Berkman |
| 1 | Cathi,I congratulate you on running two businesses at once.As to your question, I would have to agree with Helen. As I understand your query and facts in brief, are that people are invited and come to a Tupperware party, and may, or may not buy items for personal use - Tupperware goods. I assume that Cathi gives a short presentation as to what's out there, people mingle and at some point decide to buy some food since they are at a restaurant. So, at the party, individuals purchase and pay for their own food, e.g., meaning that Cathi does not pay for it.So you want to know if the amount of the food purchased is deductible by the individual people at the party on their own tax returns, not whether any payments paid by the party host is deductible correct?You indicate that the food purchase amount, since it is required by the restaurant, is akin to a fee charged by the restaurant?I just don't see any reason these individuals would have a deduction. I would say there are only two ways to get a deduction. As a business expense, or as a business expense that is deductible as an itemized deduction.If the individual paying for their food is in the trade or business of attending Tupperware parties, I suppose you could say the amount may be deductible. Whether it's 50% or 100% deductible is a beyond the scope of this memo as it is ludicrous to believe that someone is in the business of attending Tupperward parties. The facts, though sparse would seem to indicate that these are occasional parties attended occasionally, nothing more that would bring a Trade or Business into play.If you want to deduct as a itemized deduction, you need to have something like a trade or business expense, but that you report the amounts on a 2210 and Schedule A as opposed to a Schedule C.I just don't see a reason for deducting any amounts incurred, when buying personal use-type products, unless you can make a case a trade or business is involved. The facts don't seem to indicate such a situation.linkanswered 03 Nov '09, 02:24 jim339●1●3 accept rate: 5%edited 03 Nov '09, 02:36The question does not specify who is buying the food. Each person attending, or Cathi and the rest of the vendors who are selling thier wares. If each individual is buying, I agree there is no dedcution, but if the vendors are paying for the food, then it is a trade or business deduction as the food is incidental in the selling process as my answer provides. (BTW, your 2210 reference should be 2106.)(03 Nov '09, 02:56)Brent BerkmanIn my response, I indicated that I read that Cathi said WE buy food. I am sure that is not Cathi and her mouse so the we indicates to me that they are eating dinner there and the they seems to indicate that each pays for their own. IMHO(03 Nov '09, 13:42)SandySea |
| 1 | I didnt expect such a variety of answers. Interesting how some areas do not always seem so black and white. Thanks everyone.linkanswered 07 Nov '09, 20:20Cathi 261●1●5 accept rate: 0%Cathi, out of curiosity, what is the situation with the meals? Is the food incidental to the selling activity, purchased as a group, (buffet style) as a condition of utilizing the meeting room, as I suggest in my comment to Steohen Weinstein's answer?(07 Nov '09, 20:34)Brent Berkman1The pizza place requires food be purchased as a condition to use the group room. I wouldnt choose to buy food if I didnt have to. The food can be eaten before or during the party. I cant eat and give a presentation at the same time. It is an individual meal and not a buffet style or shared with the guests. The guests purchase their own if they wish. My question is since they require it is it deductible. You can have more quests in a restaurant then you can in someones home so the potential to make a lot more profit. Min 200 or 300 a night. At a home maybe 100 - 150.(08 Nov '09, 04:42)CathiIf each person is purchasing their own food, while the "guests" (buyers) would not be able to claim a deduction, it appears that the vendors (sellers) may be entitled to a deduction limited to 50% of the cost for the meal, as they are there with a business purpose. However, if the vendors were to negotiate a "deal" with the restaurant to utilze space at a fixed fee for the evening, or "rent", that fee could be allocated to each vendor and deductible at 100%, however, a cost / benefit analysis is required in order to determine if the benefit of the tax deduction compared to the cost is worth it(08 Nov '09, 18:13)Brent Berkman |
| 1 | The important information is in Cathi's last comment.quote "It is an individual meal and not a buffet style or shared with the guests. The guests purchase their own if they wish."end quote.There are several court cases that closely reflect your situation in regards to meals that may or may not have a business purpose. The fact that you only buy your own and the guests must pay for their own and you are not out of your tax home area leads me to agree with the other tax practitioners that would decline the deduction. If the guests buy food then the requirement by the "pizza place" would be met by the guests. You must buy supply your own food someway for that day, either in a restaurant or purchased and prepared at home and the IRS sees no difference in that and the meal your purchased before the sales meeting.Reference Toni's answer above. It is spot on. |
No comments:
Post a Comment