Entertaining clients at vacation home

kgcpa · #1 (**permalink**) 03-02-2008, 08:19 PM

What costs can you deduct when entertaining clients at an employee's vacation home?

My client bought a vacation home in 2007. He is a 50% owner of a C Corporation, and he took several clients to his vacation home over the course of the year. Assuming business was discussed during these trips, what costs can he deduct, and how? Meals, entertainment, and travel costs I'm guessing would be deducted on Schedule A as unreimbursed employee expenses, but he thinks he should be able to deduct a portion of costs associated with the maintenance and upkeep of his vacation home, such as association fees, electricity, etc. I don't think this is right. Any advice would be appreciated.

TaxGuru · #2 (**permalink**) 03-04-2008, 10:54 AM

I am 100% convinced that in the event of an Audit, these expenses would be found to be non-deductible and according to the IRS strong arm tactics, you the Preparer will have to bear the consequences of being Fined at least Tier 1 penalty of $1,000. Not, to mention that you will have to make a disclosure on the tax return claiming this deduction.

Its really not worth the pain to attempt to appease the client on this! No is my answer!

kgcpa · #3 (**permalink**) 03-04-2008, 01:26 PM

Thank you! That's exactly what I thought.

TaxGuru · #4 (**permalink**) 03-05-2008, 03:01 AM

You are welcome!