When Are Meal Expenses Nondeductible Entertainment?

By Herman Spence III

The IRS recently issued Notice 2018-76 to provide transitional guidance on the deductibility of certain business meal expenses.  Taxpayers may rely on the Notice until regulations are issued.

1. Interim guidance. Under the Notice, taxpayers may deduct 50% of an otherwise allowable business meal expense if (a) the expense is ordinary and necessary and incurred in carrying on a trade or business, (b) the expense is not lavish or extravagant, (c) the taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages, (d) the food and beverages are provided to a current or potential customer, client, or business contact, and (e) where food and beverages are provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment or the cost is stated separately.

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