Discussion:1099 for Business Gifts?
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Discussion Forum Index --> Tax Questions --> 1099 for Business Gifts?
| 22 February 2008 | |
| Client sends its biggest vendors on a cruise, where they also undergo a "seminar" of sorts in learning about client's new products. Is the value a non-deductible business gift? If so, is a 1099 required? | |
RoyDaleOne (talk|edits) said: | 22 February 2008 |
| Gift what gift? The client is look for a sale it is mostly likely a promotional item, quid pro quod. A gift is limited to $25 per person. Fully, deductible subject to the travel and entertainment rules, and because it was a water cruise you have to look at limit also. | |
| 3 June 2008 | |
| Has anyone found anything out about this?
If the client gives gifts to big clients, and actually has no intent of deducting those gifts on his return, it makes no sense to me why he should have to send each of the recipients a 1099 for the value of the gift, but that's what, i believe, the IRS claims should happen. I thought it might have to do with some of those being entertainment expenses, but, again, i really dont see the problem when the giver is not trying to deduct? any help would be greatly appreciated! | |
| 3 June 2008 | |
| Everybody knows that this is not a deductible business activity. The customers fully expect to be 1009ed (or at least they need to be informed). This is a common practice for rewarding top customers. Of course, they would prefer not to pay the tax, but they know the drill. Do you really think that they don't discuss this with others on the cruise? | |
| 3 June 2008 | |
| I actually dont think that many customers know that smaller things, such as fishing or hunting trips, will result in taxable income to them when recieved by a client. For instance, if the taxpayer takes his attorney and his accountant and their children on a fishing trip (with which he has a personal relationship, but one as a result of the business relationship) in excess of $600 - he is required to give each a 1099 for the value of the fishing trip at the end, even if he doesn't plan on deducting the amount as a business expense? it seems that he is getting no real economic benefit from the expense on the trip as he is a client of the attorney and the accountant and is not seeking anything in return. it seems, then, that no business would ever want to give clients lavish business gifts because the negative consequences of the 1099 do more than the benefit of the unsolicited gift.
the only possible loophole that i could think of would be entertainment expenses paid for a client to which the taxpayer/donor is not in attendance (like sporting or other event tickets), since he would have the option of treating it as a nontaxable gift. i can't think of any other exclusions beyond fringe benefits (which, obviously, nothing >$600 is going to qualify as a de minimus fringe benefit) which would allow the donor to escape 1099 reporting. am i totally off track here? | |
RoyDaleOne (talk|edits) said: | 3 June 2008 |
| Marcilio, I don't know that this is not deductible.
Does the activity you are discussing have a donative intent, like a contribution, to make it a gift? This is a business activity, and something in return is expected. | |
| 3 June 2008 | |
| It is deductable because there are strings attached to the cruise. There is a business intent. | |
| 4 June 2008 | |
| I'm sorry if I was harsh in my comments. What I meant to convey is that the people who receive this type of perk typically are aware of the tax ramifications. I'm attaching the following for clarification, but in this case I am suggesting that the expenditures for the cruise as described are not deductible unless the recipients are given a 1099.
274(h)(4) SUBSECTION TO APPLY TO EMPLOYER AS WELL AS TO TRAVELER. -- 274(h)(4)(A) Except as provided in subparagraph (B), this subsection shall apply to deductions otherwise allowable under section 162 to any person, whether or not such person is the individual attending the convention, seminar, or similar meeting. 274(h)(4)(B) This subsection shall not deny a deduction to any person other than the individual attending the convention, seminar, or similar meeting with respect to any amount paid by such person to or on behalf of such individual if includible in the gross income of such individual. The preceding sentence shall not apply if the amount is required to be included in any information return filed by such person under part III of subchapter A of chapter 61 and is not so included. 274(h)(5) REPORTING REQUIREMENTS. -- No deduction shall be allowed under section 162 for expenses allocable to attendance at a convention, seminar, or similar meeting on any cruise ship unless the taxpayer claiming the deduction attaches to the return of tax on which the deduction is claimed -- 274(h)(5)(A) a written statement signed by the individual attending the meeting which includes -- 274(h)(5)(A)(i) information with respect to the total days of the trip, excluding the days of transportation to and from the cruise ship port, and the number of hours of each day of the trip which such individual devoted to scheduled business activities, 274(h)(5)(A)(ii) a program of the scheduled business activities of the meeting, and 274(h)(5)(A)(iii) such other information as may be required in regulations prescribed by the Secretary; and 274(h)(5)(B) a written statement signed by an officer of the organization or group sponsoring the meeting which includes -- 274(h)(5)(B)(i) a schedule of business activities of each day of the meeting, 274(h)(5)(B)(ii) the number of hours which the individual attending the meeting attended such scheduled business activities, and 274(h)(5)(B)(iii) such other information as may be required in regulations prescribed by the Secretary. | |
