Ralph made the following business gifts during the year. $\begin{array}{lr}
\text { To Robert (a key client) at Christmas } & \$ 50 \
\text { To Angel (Robert's 8-year old daughter) on her birthday } & 20 \
\text { To Art (Ralph's secretary) on his birthday (\$3 was for gift wrapping) } & 30 \
\text { To Paige (Ralph's boss) at Christmas } & 40
\end{array}$ Presuming proper substantiation, Ralph's deduction is:

Question

Quizplus · Accepted Answer

The IRS allows a deduction of up to $25 per person per year for business gifts. The gift to Angel is not deductible because it is a personal gift, not a business gift. The gift wrapping for Art's gift is included in the total gift cost, making the deductible amount for Art's gift $25 (not the full $30 because of the $25 limit). Thus, Ralph can deduct $25 each for gifts to Robert, Art, and Paige, totaling $75. However, incidental costs, such as gift wrapping, are not subject to the $25 limit if they do not add substantial value to the gift. Therefore, the $3 for gift wrapping for Art's gift can be added to the deduction, making the total deduction $78.

Ralph Made the Following Business Gifts During the Year Presuming Proper Substantiation, Ralph's Deduction Is: A)$0

Ralph Made the Following Business Gifts During the Year Presuming Proper Substantiation, Ralph's Deduction Is:
A)$0