Defining Lavish and Extravagant Business Expenses - 0.2 CPE

When does an expensive business meal cross the line from deductible to lavish or extravagant? The tax law provides no fixed dollar threshold, making facts and circumstances critical. Practitioners must look beyond the price tag and evaluate the business purpose, setting, participants, reasonableness of the expenditure, and supporting documentation.

Learning Objective

Evaluate whether a business meal expense may be considered lavish or extravagant based on the surrounding facts and circumstances.

Course Description

This nano-learning course examines how the lavish or extravagant standard applies to business meals, including the role of facts and circumstances, business purpose, reasonableness, and substantiation.

Who Should Take This Course

Professionals who prepare business tax returns or advise clients on the deductibility, documentation, and substantiation of business meal expenses.

Practical Considerations

A high-dollar meal is not automatically lavish or extravagant, and an expensive restaurant does not by itself make an expense nondeductible. The determination depends on whether the expense is reasonable in relation to the particular business circumstances. Practitioners must also remember that the lavish or extravagant standard is separate from the ordinary and necessary business expense requirements and the general 50% limitation applicable to business meals.

Author / Instructor

Lee T. Reams, Sr., BSME EA
Lee T. Reams, Sr. is an Enrolled Agent with extensive experience in tax preparation, representation, and advanced tax planning. He is known for helping practitioners apply complex tax rules in real-world client situations.

Course Details

This course qualifies for NASBA continuing professional education credit. CountingWorks, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org. 

Look Beyond the Price

Explore Defining Lavish and Extravagant Business Expenses to better evaluate questionable business meal expenses using the facts, business purpose, reasonableness, and documentation behind the expenditure.