Q. Our company is rewarding another firm for providing us with leads. Are these “rewards” treated as deductible
A. No. Even better, rewards of cash or property for furnishing the names of potential customers or clients are treated as compensation. In a landmark case, the U.S. Supreme Court ruled a long time ago that such transfers constitute payment for services rendered. (Duberstein, 363 US 278, 6/13/60) Therefore, the payments are fully deductible.
Tip: In contrast, the deduction for business gifts is limited to a paltry $25 per recipient. You’ll usually come out way ahead with a compensation deduction.