Camila purchased the following items for her customers: ten gift baskets at $28 per basket, 500...

Camila purchased the following items for her customers: ten gift baskets at $28 per basket, 500 pens with her name on them for $135, and two football tickets with a face value of $58 each. Camila did not attend the football game, but instead gave the two football tickets to two clients. Camila is electing to deduct the two football tickets as business gifts. What is the total of the deductible expenses?

Expert Solution

Gift Baskets: The general rule of IRS allows your business to deduct up to $25 for business gifts you give to any one person per year. Further there is no limit on how many people you can give business gifts to during the year, nor on how much you spend for those gifts, although your business gift deduction is limited to $25 per recipient.

Therefore from ten gift baskets of $28 per basket, deduction will be available upto $25 per basket, i e; $250 ($25 x 10).

Pens: In case the business is providing customers and clients small promotional items such as: pen, plasstic bag, key chains,etc, that costs $4 or less and have your name or company's name clearly and permanently imprinted on them may be deducted without any limitation. In the given case the cost of per pen is $3.70 (500 / $135) and Camila's name is imprinted on that pen.

Therefore the total amount of $135 will be deductible.

Football ticket: If you give the tickets and do not attend the event yourself, you can choose whether to declare the tickets a gift, subject to the $25 limitation, or entertainment expense. In the given case, Camila is considering the same as a business risk, hence $25 per ticket is deducted i.e; $50.

Total deductible expenses will be = $250 + $135 + $50 = $435

ekkarill92 answered 2 years ago

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