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Old 12-24-2008, 04:48 PM
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$120 Meal for owner/employee and client - how much deductible?

C corp owner&employee (1 person) and key client (2nd person) have $120 dinner.

Is this right:
1) $120 dinner bill is fully reimbursed to owner/employee (according to C Corp accountable reimbursement plan/policy). Owner/employee has no personal income here...this is just a biz expense reimbursement. $120 biz expense to Corp.
2) Corp can deduct full $120 due to this being a business meeting that happen to include food as part of the biz meeting.

3) if 2) above is not right, then what % of the $120 is subject to 50% deduction limit...i would think only the employee's half of the meal cost...that is $60*.5= $30 deduction for employee portion...but still a full 100% of the client's portion of the meal cost ($60)...for a total tax deductible for C Corp of $90?

I'm hoping 2) above is right. Perhaps neither 2 nor 3 is right? Help, as the 50% meal thing seems to apply to employees not performing biz duties DURING the meal (e.g. meal when traveling to client location, and meal does not include client)

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Old 12-25-2008, 03:04 PM
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According to the tax law, any meals and entertainment expense where there was a discussion of business or entertaining a potential client or results in some future business is a deductible business expense by a C or an S corporation.

In your case, this is a C corporation and the $120 meals expense was paid by the employee/owner of the business.

Regarding your point 2), the entire cost of the meals that is your cost and the client cost is deductible. You do not have to segregate your cost of the meals from the client portion, in fact, the IRS allows you to deduct the entire cost of the meals!

The corporation has reimbursed you and so the expense becomes deductible on the corporation's tax return as a meal and entertainment expense. But, only 50% of this amount is deductible for tax purposes, that is $60 and this is shown on page 4 of the 1120 Corporation tax return as an M-1 item.

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