Tax code annoyance: sports vs. arts

[TheDad]

<p>Okay, so my taxes are done for the year and it feels as if I’ve passed a kidney stone. (Article in the paper says that folks with a Schedule C take 48 hours to do their returns…more than a full-time work week. And by the time I’ve got the info pulled together and organized, it doesn’t pay me to pay an accountant.)</p>

<p>But one of many things that bugs me: many tickets to sporting events are fully deductible as a business expense, but not so tickets to ballet, opera, etc. Clearly it benefits the owners of sports franchises and have sky boxes, etc., to sell. But in comparison, the arts get the shaft.</p>

<p>Feh.</p>

[emeraldkity4]

<p>that doesn’t make sense
and arent most arts organizations non profit?
Id on’t think they can say that about sports franchises.</p>

[barrons]

<p>If you take clients to the Opera you certainly could deduct it as entertainment. You can even take them to the Windsor Ballet.</p>

[xiggi]

<p>Interesting discrimination. However, the distinction between a play and a football game does not seem that apparent.</p>

<p>Could it be that TD might seek to deduct his OWN ticket without passing the IRS tests? Now what if TD “started” writing weekly reviews of movies, museums, and ballet in LA and collected small token of appreciations from his friends? Could he not deduct all his expenses associated with the collection of material? </p>

<p>Obviously, that assumes he does have friends, and especially friends willing to pay for the service. Tall order? </p>

<p>From <a href=“http://www.irs.gov/taxtopics/tc512.html[/url]”>http://www.irs.gov/taxtopics/tc512.html&lt;/a&gt;&lt;/p&gt;

<p>

Topic 512 - Business Entertainment Expenses</p>

<p>Entertainment expenses that are both ordinary and necessary in carrying on a trade or business may be deductible if they meet one of the following two tests: </p>

<p>the directly–related test, or
the associated test. </p>

<p>In order to meet the directly-related test under the general rule you must show that: </p>

<p>You had more than a general expectation of getting income or some other specific business benefit at some future time;
You engaged in business with the person being entertained during the entertainment period;
The main purpose of the entertainment was the active conduct of business; and
The expenditure was allocable to the taxpayer and a person with whom the taxpayer conducted business during the entertainment or with whom the taxpayer would have conducted business (if it were not for circumstances beyond the taxpayer’s control). </p>

<p>You may also meet the directly-related test by showing that the expenditure was for entertainment occurring in a clear business setting directly in furtherance of the taxpayer’s trade or business; that the expenditure was made directly or indirectly to someone (other than an employee) as compensation for services; or that the expenditure was paid as a prize or award which is required to be included in the recipient’s gross income. An expense will not be directly related under circumstances in which there is little or no chance of engaging in the active conduct of business. </p>

<p>For entertainment to meet the associated test, you must show that the entertainment was associated with the active conduct of your trade or business and directly preceded or followed a substantial and bona fide business discussion. </p>

<p>You must have records to prove the business purpose (under the applicable test) and the amount of each expense, the date and place of the entertainment, and the business relationship of the persons entertained. For further information on record keeping, refer to Topic 305. </p>

<p>Generally, only 50% of meal and entertainment expenses are allowed as a deduction. For exceptions to the 50% limitation, refer to Publication 463, Travel, Entertainment, Gift and Car Expenses.</p>

<p>Entertainment includes any activity generally considered to provide/constitute entertainment, amusement, or recreation. This includes entertaining guests at night clubs, social events, theaters, sporting events, athletic clubs, on yachts, or on hunting and fishing vacations, and similar trips. The cost of a meal you provide a customer or client is deductible as entertainment (subject to the 50% limitation) only if you or your employee is present when the food or beverages are provided.

</p>

<p>or </p>

<p>from <a href=“http://taxguide.completetax.com/text/Q13_2640.asp[/url]”>http://taxguide.completetax.com/text/Q13_2640.asp&lt;/a&gt;&lt;/p&gt;

<p>

Entertainment gifts. What happens if you give tickets to a play or sporting event to a customer or client? Is this a gift expense or an entertainment expense ? The general rule is that any item that could be considered either a gift or an entertainment expense must be considered an entertainment expense. However, if you give the tickets and do not attend the even yourself, you have the choice of determining whether an item is either a gift or entertainment expense. If you go with the client, you must treat the cost of the tickets as an entertainment expense — you have no choice. </p>

<p>Save Money </p>

<p>Taking into account the $25 limit for gifts and the 50 percent limitation on entertainment expenses, it’s generally better to treat a ticket expense as entertainment when it is over $50. </p>

<p>For example, let’s say you gave a client ballet tickets that cost $140. If you deduct them as a gift expense, your deduction is limited to $25. If you deduct them as an entertainment expense, your deduction is $70. Conversely, if you gave a client tickets to a movie premiere that cost $30, you would get a bigger deduction by claiming a gift expense ($25 as opposed to $15 for an entertainment expense). </p>

<p>

</p>

[NJres]

<p>I don’t understand the distinction.</p>

[mini]

<p>"Could it be that TD might seek to deduct his OWN ticket without passing the IRS tests? Now what if TD “started” writing weekly reviews of movies, museums, and ballet in LA and collected small token of appreciations from his friends? Could he not deduct all his expenses associated with the collection of material? "</p>

<p>Gray area. I know - I’m a writer! and on homeschooling matters - can I deduct any homeschooling expense if I write about it? Or to what extent? What is the “primary purpose” of the activity? Most important of all, is writing reviews an “income-generating activity”, with the intent being to make a profit (3 out of every 5 years minimum?)</p>

[NJres]

<p>mini - at least you can rationalize all your cc time and posts as “working”</p>

[barrons]

<p>Apparently nobody here speaks Michigan:</p>

<p>“The Windsor Ballet”: Term used by Detroiters to say they’re going to Canadian strip clubs in nearby Windsor. “Where ya’ff to, honey?” “Oh, the boss wants us to take a client out to the ballet. In, uhh, Windsor.”</p>

[mini]

<p>Addicts, when in denial, don’t really need to rationalize. ;)</p>

[NJres]

<p>We don’t? I mean, They don’t? I’m doing research for a novel.</p>

[younghoss]

<p>I guess that makes me the minority- I just enjoy the beauty of the female figure!</p>