When certain conditions are met, an employer may deduct amounts paid to employees under an accountable plan for sporting events tickets. Under Regs. Sec. 1.274-2(c), the event must be directly related to the conduct of business. IRS regulations typically require the employee to engage in a business meeting, discussion, negotiation, or other bona fide business transaction on the employer’s behalf while attending the event.
Meeting the “conduct of business” requirement is usually very easy and straightforward when the employee is attending the event with a client or business relationship prospect. However, there is more to determining whether it is possible to deduct tickets to sports events. The regulations include two stipulations under which the deduction may not be allowed. Employers may not claim the deduction if the tickets were simply provided to a client or prospect to go to the event without an employee or representative of the company also being present. In this case, the tickets would be considered a gift. The IRS may also conclude that if substantial distractions take place at the event to the extent that no business transaction could be conducted there, the employer may not be able to claim the deduction. It is possible to argue that crowd noise in general seating areas are too distracting to allow conversations surrounding a business transaction to take place. Therefore, employers are advised to purchase tickets in suites and more secluded areas if they wish to claim the deduction.
Regs. Sec. 274(l)(2) limits the deduction for seats in a luxury suite to the value of non-luxury box seats. While taxpayers may use the highest face value of non-luxury seats, the taxpayer may only use the value of seats that are offered to the general public to determine the amount of the deduction. The deductible amount of the ticket price along with food and beverage expenses are subject to the 50 percent limit that generally applies to meal and entertainment expenses.
Because the rules of determining whether sporting event tickets may seem murky to taxpayers, enlisting the help of a qualified accountant is highly recommended. Gary M. Kaplan is a seasoned C.P.A. He is available to assist individual and business clients in Florida, Maryland, Washington, D.C., Utah, and New York with virtually every tax preparation need. Give Mr. Kaplan a call to learn more about how businesses can deduct tickets to sports events.
