Apps

Jeff Robinson

January 5, 2015

A corporation can deduct the cost of business gifts. However, total business gifts made (directly or indirectly) during a tax year to any one individual are limited to $25—anything above this amount is nondeductible. The deductible portion of gift expenses is reported the same as travel and entertainment.

$25 Limit

A gift to a business entity that is intended for the eventual personal use or benefit of an employee or owner of the entity is considered a gift to an individual (and thus nondeductible to the extent it exceeds $25). In one case, the Tax Court limited to $25 each the taxpayer's claimed deductions of $210 each for 36 gift certificates. According to the Tax Court, the taxpayer failed to establish that the gift certificates were given to undesignated and unknown members of a large group in the sole discretion of the receiving entity.

Recognizing the Exceptions to Gift Treatment

A gift to a corporation or other business entity for use in its business (e.g., a technical manual) is not considered a gift to an individual and thus is not subject to the $25 limitation. In addition, the following items are not considered gifts subject to the $25 limit:

The treatment of gifts can be changed in an amended return any time within the three-year statute of limitations.

Please contact us at 804.270.6980 if you have any questions or would like to discuss this or other tax reporting matters.

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