Tax Clinic:
Personal assets can be deducted
QUESTION:
May the cost and
maintenance o f a personal asset used
by employees for vacation purposes
be properly taken as a business
deduction?
Following this method, the cost and
maintenance of a personal camper,
boat. or vacation home may be taken
as a proper business deduction .
After 197 . a taxpayer may not
deduct the cost or maintenance
associated with an entertainment
facility such as yachts, fishing camps,
and hunting lodges. Dues for country
clubs will still be allowed as a
deduction . This change restricts a
taxpayer's deduction when entertain-
ing employe es by means of using a
p ersonal asset.
services actually rendered for him in
con nect ion with his trade . business.
or profession.
What is considered " reasonable "
in any particular case depends on the
particular fa ctual situation. The type
o f com p ensation. how it is deter-
mined. and the form of payment are
immaterial if the compensation is
reasonable and relates to services
rendered . To deduct the use of these
personal assets by employees , the
value of the use must be treated as
compensation to th e employee .
ANSWER: Th e cost and main -
tenance of a personal camper. boat.
or vaca ti on home . used by emp loy-
ee . may be deducted as an expense
if treated correctly ascompensation to
the employee. A ta xpayer may
deduct reasonable compensation for
Business gifts are deductible--usually
QUESTION: Is there a maximum
amount that I can deduct as th e cost
of giving gifts to my custo m ers?
pouse o r a chi ld of an individual is
considered as a gift to the individual.
Thu s. if during th e year you give a
wed ding gift of $25 to a customer's
son. and at Christmas send your
custo m er a bottle of brandy at a cost
of $15 . your deduction for gifts to
that custom er will be limit ed to $25 .
Promotional items such as pens ,
bags . or cases containing your
business name, given to custom ers ,
are not subject to the $25 limitation
per donee . In addition, incidental
costs. such as costs of engraving ,
packaging . insuring, or mailing . are
not gen erall y included in determining
the cost of th e gift for purposes of
applying the $25 limitation .
Certain items given to individuals
ANSWER: A business gift given to
an individual is deductible providing
the giving o f the gift is an ordinary
and necessary expense to your
busin ess. Generally . gifts given to
your customers. suppliers. profes-
sional advisor. and associates . will be
allowed as deductible business gifts:
however. gifts given to close relatives
o r fri ends may not be deductible .
The amount of the deduction for
business gifts m ade directly or
indirectl y, in any ta x year, is limited
to $25.00 per person . A gift to a
may be considered as gifts or
entertainment expenditures . At your
election . for example. tickets for
sporting events or other entertain -
m ent , given to your customer for his
own use, may be considered as an
ent ertainment expenditure , thus not
subject to the limitation of $25 per
year. However. deduction for enter-
tai nm ent expenses are subject to
strict rul es. which must be complied
with in order to obtain a deduction
as an entertainment expense .
Bu sin ess considerations often ne -
cessitate the giving of gifts to
individuals at a cost in excess of $25
per year . However , your deduction
fo r such gifts will be limited to $25
per year .
STATEMENT OF OWNERSHIP, MANAGEMENT ANO CIRCULATION
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