Elaine, the regional sales director for a manufacturer of exercise equipment, pays $2,500 to rent a skybox for a visiting performance of the Harlem Globetrotters.The skybox holds 10 seats, and Elaine invites 7 clients to the event.Nonluxury seats range in price from $80 to $120.The refreshments provided during the event cost $600.If Elaine meets all of the requirements for deductibility (i.e., business discussion, substantiation), she may deduct:

Question

Quizplus · Accepted Answer

Under the tax law, only 50% of the cost of business entertainment is deductible. The total cost is $2,500 (skybox) + $600 (refreshments) = $3,100. 50% of $3,100 is $1,550. However, the deduction is limited to the nonluxury seat price, which is 8 seats (Elaine and 7 clients) at $80 each, totaling $640. 50% of $640 is $320. Adding 50% of the refreshments ($300), the total deductible amount is $620. However, the correct answer is $900, which suggests a different interpretation or error in the options provided.

Elaine, the Regional Sales Director for a Manufacturer of Exercise