The Jewish Home | OCTOBER 29, 2015
MARCH 22, 2018
A Glass or Two of Bubbly
THE BALTIMORE JEWISH HOME
By Allan Rolnick, CPA
B A LT I M O R E J E W I S H H O M E . C O M
he three-martini lunch has a long and mostly honorable history as a deductible business expense. President Jimmy Carter, tried (and failed) to cut the deduction from 100% to 50%. The Tax Reform Act of 1986 succeeded in that goal, and today’s business dinner has probably switched from martinis to white wine. But old habits die hard — check any happening lunch spot and you’ll find happy diners eating partly on Uncle Sam’s dime. A certain rapper – and we’re not naming names – may have 99 problems, but reaching for the check isn’t one. Last month, he treated the president of his talent agency to an epic birthday night in Manhattan. The posse started with dinner at Zuma in midtown, where he dropped $13,000. After dinner, he took them uptown to Made in Mexico for $9,000 worth of drinks. And a group of six stragglers finished off the night at a club. Apparently, said rapper and his friends were very thirsty, very generous, or both. The group’s bar tab — ticket #48 — included 20 bottles of Ace of Spades brand “gold” champagne at $1,200. Each.
Plus 20 bottles of “rose” champagne at $2,500. Each. Plus $6,035 in sales tax (of course). Plus an $11,100 tip. Grand total, $91,135.00. Hear it for New York! So ... he takes his employee out to dinner. Surely they talked business while they were painting the town. Should he just stuff his receipt
deductions for “associated entertainment” expenses, like golf or a ball game taking place before or after t hat business discussion. However, some tax professionals read the new law as eliminating the deduction for meals, too. But even assuming the deduction survives the new law, there’s
Grand total, $91,135.00. Hear it for New York!
in a shoebox to save for this year’s tax return? For starters, there’s a debate brewing over whether business meals are now deductible at all. For 31 years, there was no debate that you could deduct 50% of meals where there was a substantial, bona fide business discussion. The Tax Cuts and Jobs Act clearly eliminates
another hurdle to overcome. Code Section 274(k) prohibits deductions “for the expense of any food or beverages unless such expense is not lavish or extravagant under the circumstances.” Now, you can argue that if you’re said rapper, you’re expected to make it rain with $74,000 worth of champagne. And if you’re talking a glass or two to celebrate
signing a big deal, you might even be right. But we can probably assume that even his fans at the IRS would draw the line somewhere well before the 40th bottle. As for that $11,100 tip, sure it sounds like a crazy move. But it’s actually just 15% of the pre-tax tab, and pretty stingy for New York! Plenty of celebrities are known for being better tippers. Shaquille O’Neill asks servers to tell him how much they want. And George Clooney routinely leaves servers a 150% surprise. When was the last time you went out for a really special meal? Was it a birthday, an anniversary, or some other celebration? It probably wasn’t deductible. But careful tax planning might keep enough in your pocket to cover your own epic night out. Make sure you have a plan when you’re ready to save, and let’s see if you can raise a glass of bubbly to the results!
Allan J Rolnick is a CPA who has been in practice for over 30 years in Queens, NY. He welcomes your comments and can be reached at 718-896-8715 or at email@example.com.
Baltimore Jewish Home - 3-22-18