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No such thing as a free lunch

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. Can I deduct the cost of a lunch with a customer if we discuss business during the meal? A.J.F., Frederick, Md.

A. Yes. You can still deduct 50% of the cost of a meal if it precedes or follows a “substantial business discussion.” To this end, the IRS says, “A business discussion will not be considered substantial unless you can show that you are actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific business benefit.” (Pub. 463, Travel, Entertainment and Gift Expenses)

Tip: Deductions for business entertainment and meals are limited to 50% of the cost. Furthermore, no deduction is allowed for costs that are lavish or extravagant under the circumstances.

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