What entertainment is not deductible?
Expenses for recreational activities or facilities are not deductible unless one of the exceptions under §274(e) applies.
What are the IRS rules regarding entertainment expenses?
Expenses must not only be “ordinary” but also “necessary” to be deductible, even if clearly incurred in carrying on a trade or business. An expense is “ordinary” if it is normal or common within the taxpayer's business community, even if it is unusual for the taxpayer. Additionally, an expense is “necessary” (rather than absolutely essential) if it is appropriate and useful to the trade or business. Courts tend to accept the taxpayer's own determination of the business necessity of an expense, unless the item is a personal or capital expense.
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