For each of the following situations, determine whether the item is deductible, how it would be deducted on the taxpayer's return (if there are alternatives possible, discuss the conditions which would determine the treatment) and any limitations that might be placed on the deduction.
a. Monica took a client out to dinner to discuss the tax aspects of the client's proposed acquisition of a rival company. After dinner, Monica took the client to see a play.

1. Assume Monica is self-employed
2. Assume Monica is an employee of GHQ Corporation. GHQ does not reimburse its employees for entertaining clients.

b. Sergio owes Edward $5,000. During the current year, Sergio files for bankruptcy. Sergio's attorney indicates that due to Sergio's poor financial condition his creditors will be lucky to get $.80 on the dollar for their debts.

1. Assume Sergio is a customer of Edward's (an accrual basis taxpayer) and the $5,000 debt is from an account receivable related to Edward's business.
2. Assume Sergio is a business associate of Edward's. Edward loans Sergio the $5,000 to pay off some gambling debts. Edward owns a meat packing plant.
a.Monica took a client out to dinner to discuss the tax aspects of the client's proposed acquisition of a rival company. After dinner, Monica took the client to see a play.

Question

For each of the following situations, determine whether the item is deductible, how it would be deducted on the taxpayer's return (if there are alternatives possible, discuss the conditions which would determine the treatment) and any limitations that might be placed on the deduction.
a. Monica took a client out to dinner to discuss the tax aspects of the client's proposed acquisition of a rival company. After dinner, Monica took the client to see a play.
 
1. Assume Monica is self-employed
2. Assume Monica is an employee of GHQ Corporation. GHQ does not reimburse its employees for entertaining clients.
 
b. Sergio owes Edward $5,000. During the current year, Sergio files for bankruptcy. Sergio's attorney indicates that due to Sergio's poor financial condition his creditors will be lucky to get $.80 on the dollar for their debts.
 
1. Assume Sergio is a customer of Edward's (an accrual basis taxpayer) and the $5,000 debt is from an account receivable related to Edward's business.
2. Assume Sergio is a business associate of Edward's. Edward loans Sergio the $5,000 to pay off some gambling debts. Edward owns a meat packing plant.
a.Monica took a client out to dinner to discuss the tax aspects of the client's proposed acquisition of a rival company. After dinner, Monica took the client to see a play.

Quizplus · Accepted Answer

The Answer of For each of the following situations, determine whether the item is deductible, how it would be deducted on the taxpayer's return (if there are alternatives possible, discuss the conditions which would determine the treatment) and any limitations that might be placed on the deduction.
a. Monica took a client out to dinner to discuss the tax aspects of the client's proposed acquisition of a rival company. After dinner, Monica took the client to see a play.
 
1. Assume Monica is self-employed
2. Assume Monica is an employee of GHQ Corporation. GHQ does not reimburse its employees for entertaining clients.
 
b. Sergio owes Edward $5,000. During the current year, Sergio files for bankruptcy. Sergio's attorney indicates that due to Sergio's poor financial condition his creditors will be lucky to get $.80 on the dollar for their debts.
 
1. Assume Sergio is a customer of Edward's (an accrual basis taxpayer) and the $5,000 debt is from an account receivable related to Edward's business.
2. Assume Sergio is a business associate of Edward's. Edward loans Sergio the $5,000 to pay off some gambling debts. Edward owns a meat packing plant.
a.Monica took a client out to dinner to discuss the tax aspects of the client's proposed acquisition of a rival company. After dinner, Monica took the client to see a play.

For Each of the Following Situations, Determine Whether the Item