Taxes Made Simple

Khaz (theatre owner) asks:

Mike- 

I run a local theater. Several of my good friends are regular patrons. If I were to take one out to dinner, would the cost be deductible?

Answer: 

Khaz, to get a deduction for meal expenses, the meal generally must meet the following three requirements (from IRS Publication 463):
1. The main purpose of the combined business and entertainment was the active conduct of business,
2. You did engage in business with the person during the entertainment period, and
3. You had more than a general expectation of getting income or some other specific business benefit at some future time.

If the meal meets all three requirements, you can still only deduct 50% of the cost.

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