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Know the Rules Before Deducting Sporting Event Tickets as a Business Expense

Posted by Peter DeMarco on Dec 8, 2015 10:00:00 AM

tax professional calculating business expenses using pen, paper and calculatorA common practice for business owners is to mix business and entertainment at a sporting event. Whether it be a basketball, football, or baseball game, these events are oftentimes an influential part of business dealings. Deals can be closed and prospects can be wooed thanks to the relaxed atmosphere of a stadium or arena. The same kind of pressure to do business is not present as it would be in a boardroom, allowing conversations to flow easily.

However, business owners who assume they can write off the cost of these sporting events without checking the rules set forth by the IRS can be setting themselves up for extra heartbreak. The IRS clamps down hard on those who deduct the costs of such entertainment as business expenses by only providing a receipt. So how do you ensure that you stay out of the penalty box?

Tax Rules to Consider When Deducting Sports Tickets

Sporting Event Must Tie Directly to Business

First, the IRS states that the company claiming the deduction for the sporting event in question must be able to show that some sort of business took place at some point during the duration of the event. This means that you can’t just give your client or prospect your tickets and then write them off. The logic behind this is that it’s hard to do business if your client or prospects are at the event alone. Piggybacking off of that, the IRS states that someone from your organization must then be at the event. If not, the tickets are treated as a gift, in which tax rules are different.

Sporting Events Offer Many Distractions

The IRS also finds it a little hard to believe that actual business decisions can be made during a sporting event. With superstar athletes sinking buckets or throwing TD passes, examiners imagine that business is not going to be an attendee’s main focus. How can they hear each other over the screaming fans?

The IRS feels that the particulars of a business deal would not be the main focus of the event, but offer solutions to this problem. It is suggested that attendance at a sporting event should be accompanied by a stop at some other location along the way with an atmosphere more conducive to conducting business. Acceptable locations are office space, restaurants, and even sports bars.

Limited Use by Family Members

It is common that businesses will invite a client or prospect’s family members to the same sporting event that business is being conducted. The IRS offers limited language regarding how these tickets can be deducted, with the rules stating that deductions are allowed for spouses of those involved in the transaction. Other family members however are not specifically named in the rules.

Type of Ticket

The type of tickets being used also need to be taken into consideration. Suites add another layer of complexity as the IRS limits the deduction to the face value of non-luxury box seats. The highest-value non-luxury seat price can be used as long as the general public also has the opportunity to purchase them.

It is also worth noting that suite pricing is usually a combination of the costs for entry to the event, food and beverage, advertising, and other general suite fees. Food and beverage is a deductible expense, so make sure to get an itemized receipt. This deduction is limited to 50% of the cost.

Reach out to your Meaden & Moore advisors to learn more about deducting business expenses.

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Topics: Tax Planning & Strategies

Peter DeMarco

Peter DeMarco

Peter DeMarco, with nearly three decades of tax planning experience, is a Vice President at Meaden & Moore as well as Director of the Tax Services Group.

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