Food and beverage deduction.

• Author: Laffie, Lesli S.
• Position: IRS Letter Ruling 200030001

In IRS Letter Ruling (TAM) 200030001, a brokerage firm provided meals, snacks and cocktails to its independent contractor representatives at its national and regional sales and education conferences and "top producers" conference. The IRS held that the firm's deduction of such expenses was subject to 50% disallowance under Sec. 274(n)(1).

According to the ruling, the taxpayer knew the identity of each representative attending the conferences and the aggregate cost of food and beverages provided at each (which ranged from $109--$709 per representative, depending on the conference attended). These values were not included as taxable compensation in the representatives' Forms 1099. The taxpayer deducted these values in fill on its return.

The IRS noted that the general rule under Sec. 274(n)(1) and (2) is to limit food and beverage deductions by 50%, uuless the expense is described in Sec. 274(e)(2), (3), (4), (7), (8) or (9), or is a Sec. 132 de minimis fringe benefit. According to the Service, the taxpayer's expense did not qualify for an exception, as follows:

* Sec. 274(e)(2) exempts expenses treated as compensation.

* Sec. 274(e)(3) exempts expenses...