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certificates as an “Advertising” expense on its 1993 U.S. Income
Tax Return for an S Corporation, Form 1120S. (Although the
record reflects corporate recipients for 37 gift certificates,
one certificate was apparently omitted by R&J in calculating the
claimed deduction.) Upon subsequent examination, respondent
allowed a deduction of $25 per gift certificate, for a total of
$900, and disallowed the balance.
Gift Nut Baskets
During each of the years 1993 and 1994, R&J gave gift nut
baskets to 166 nonemployees and 44 employees as promotional
Christmas gifts. The 210 baskets for each year were purchased at
a cost of $61 apiece, for a total of $12,810. With respect to
the baskets given in 1993, R&J paid $7,500 of the purchase price
in 1993 and deducted such amount in that year as an
“Administrative” expense. The remaining portion of the price,
$5,310, was paid and deducted in 1994, designated as an
“Advertising” expense. With respect to the baskets given in
1994, the full $12,810 was both paid and deducted as an
“Administrative” expense in that year.
Pursuant to the above-mentioned examination, respondent
allowed for the 1993 year a deduction of $25 per gift for only
the 166 baskets given to nonemployees. For 1994, a deduction of
$25 per gift was allowed for all 210 baskets. Any additional
amounts claimed were disallowed.
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Last modified: May 25, 2011