Divorce Mediation Blog

Food & Beverages Aren’t Entertaining Under JCTA

Wednesday, October 24, 2018

Our colleagues at Gosule, Butkus & Jesson, LLP sent out an interesting newsletter recently in which they address the fact that the Job Cuts and Tax Act of 2017 (JCTA) has eliminated the entertainment portion of business deductibility, but not the 50% deduction for food and beverages. As the meat (ahem) on the statutory bone, the Treasury Department “intend[s] to publish” proposed regulations to clarify what will remain both ingestible and deductible:

  1. The expense must be ordinary and necessary
  2. It may not be lavish or extravagant
  3. The taxpayer or employee must be present
  4. The food & drink must be consistent with that provided to other similarly situated business contacts
  5. And, if the grub is purchased during entertainment it must be invoiced or specified separately from the entertainment.

What could possibly go wrong?

They’re all fun, but Item 5 on the menu caught my eye particularly. Gosule points out a $5 hot dog at a Red Sox game will be half deductible, while the $1,500 game tickets (hell, it’s playoff time) are not; while $200 worth of food and drink in a Celtics luxury box will not be deductible at all because it is not paid or billed separately from the ticket.

That’s as logical as calling another 9th inning pitching change in a 16-1 rout or 4th quarter NBA garbage time “entertainment”.

It does call to mind the tricky job of courts, arbitrators and special masters in adjudicating adjustments to a self-employed spouse’s income for attribution purposes. A lot of season tickets get packed into pass-through expense schedules! And, many of those tickets actually do go to customers…

It also reminds me of the dilemma of creating and parsing Probate and Family Court Rule 401 financial statements, where “food”, “meals out” and “entertainment”, both personal and business, mix and mingle with regularity, with double counting galore!

Coming to a deposition or hearing room near you…

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