Tax Newsletter

• Life Insurance Proceeds & Taxes
  A common misconception about life insurance is that it is “tax-free.” While the build up in cash value of a life insurance policy is typically not subject to any income tax, the death benefit payable on the policy may be... Read more.
• Business on Cruise Ships and Ocean Liners
  It is common to conduct business on luxury travel vessels such as ocean liners and cruise ships. However, only in certain situations are some or all business expenses related to this type of travel deductible. Luxury... Read more.
• Nonprofits Must Pay Taxes on Unrelated Business Income
  Nonprofit organizations, e.g., charities, were historically not taxed. In 1950, however, an amendment to the Internal Revenue Code made taxable income earned from activities that did not further the tax-exempt purposes of such... Read more.
• Valuing Stock That is Not Publicly Traded for Estate Tax Purposes
  In 2001, Congress passed legislation incrementally increasing the amount exempt from federal estate taxes and completely eliminating estate taxes in the year 2010. However, the legislation contains a “sunset” provision... Read more.

• Digital Tax Talks Face Calls for Simplification, More Certainty
• IRS says Prince’s estate undervalued by 50%, triggering another dispute in settlement
• Huge Number of Americans in for a Majorly ‘Unpleasant’ Tax Surprise
• https://www.cnbc.com/2020/12/21/cnbc-millionaire-survey-millionaires-are-bracing-for-2021-tax-hikes-.html
• Year-End Tax Planning Tips For 2020

Deductions for Business Meals and Entertainment: The 50% Rule

In most cases, you can deduct no more than 50% of certain unreimbursed business-related meals and entertainment expenses on your income tax return. This limit applies to employees or their employers, and to the self-employed.

Exceptions

However, you may be able to deduct more than 50% of an expense if it meets one of the following exceptions:

• Your employer reimburses you for the expense under an accountable plan
• Your business entails the sales of meals or a form of entertainment
• The expense is for a charitable sporting event
• The expense is for advertising
• You are self-employed

Self-Employment

If you are self-employed, you may be exempt from the 50% limit if:

• Your expenses are because you are an independent contractor
• Your client reimburses you for your expenses
• You provide adequate records of these expenses to your customer or client

You must meet all three of these requirements in order to be exempt from the 50% limit rule.

Entertainment Tickets

Usually, you cannot deduct more than the face value of a ticket that you claim as an entertainment expense. You cannot deduct service fees or any amount over the face value that you may have paid a scalper.

However, if the ticket is for a sports event that benefits a charitable organization, you may consider the full cost of the ticket, even if it is more than face value, if:

• The event’s main purpose is to benefit a qualified charitable organization
• Entire net proceeds go to the charity
• The event uses volunteers to perform substantially all the event’s work

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