The entertainment expenses, which must be ordinary and necessary and related to the business, he can deduct these expenses if he has for entertainment a client, customer or employee. The deduction has to meet the following test:
- Directly –related test
- Associated test
Directly Related test
To be deductible under this test you must be able to show
- You had more than general expectation of a specific business benefit or getting income at a future time.
- You engaged in business with the person being entertained during the entertainment period.
- The main purpose of the entertainment was actively conduct business.
Associated test
To be deductible under this test must be able to show
- The entertainment was associated with the active conduct of your trade or business.
- The entertainment directly preceded or followed a substantial and bona fide business discussion.
In general only 50% of your business-related meal and entertainment expense can be