Chapter 3 Business Gift Expenses accommodation in StrasbourgIf you give business gifts in the course of your trade or business,you can deduct all or part of the cost. This chapter explains thelimits and rules for deducting business gifts. $25 limit on business gifts.You can deduct no more than $25 for business gifts you givedirectly or indirectly to any one person during your tax year. A giftto a company that is intended for the eventual personal use or benefitof a particular person or a limited class of people will be consideredan indirect gift to that particular person or to the individualswithin that class of people who receive the gift. If you give a gift to a member of a customer's family, the gift isgenerally considered to be an indirect gift to the customer. This ruledoes not apply if you have a bona fide, independent businessconnection with that family member and the gift is not intended forthe customer's eventual use. If you and your spouse both give gifts, both of you are treated asone taxpayer. It does not matter whether you have separate businesses,are separately employed, or whether each of you has an independentconnection with the recipient. If a partnership gives gifts, thepartnership and the partners are treated as one taxpayer. Example.Bob Jones sells products to Local Company. He and his wife, Jan,gave Local Company three cheese packages to thank them for theirbusiness. They paid $80 for each package, or $240 total. Three ofLocal Company's executives took the packages home for their families'use. Bob and Jan have no independent business relationship with any ofthe executives' other family members. They can deduct a total of $75($25 limit 3) for the cheese packages. Incidental costs.Incidental costs, such as engraving on jewelry, or packaging,insuring, and mailing, are generally not included in determining thecost of a gift for purposes of the $25 limit. A related cost is incidental only if it does not add substantialvalue to the gift. For example, the cost of gift wrapping is anincidental cost. However, the purchase of an ornamental basket forpackaging fruit is not an incidental cost if the value of the basketis substantial compared to the value of the fruit. Exceptions.The following items are not included in the $25 limit for businessgifts. An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift,and Luxus-Hotels ChaniaIs one of a number of identical items you widelydistribute. Examples include pens, desk sets, and plastic bags and cases. Signs, display racks, or other promotional material to beused on the business premises of the recipient. Gift or entertainment.Any item that might be considered either a gift or an entertainmentexpense generally will be considered an entertainment expense.However, if you give a customer packaged food or beverages that youintend the customer to use at a later date, treat it as a giftexpense. If you give a customer tickets to a theater performance or sportingevent and you do not go with the customer to the performance or event,you have a choice. You can treat the cost of the tickets as either agift expense or an entertainment expense, whichever is to youradvantage. You can change your treatment of the tickets at a later date, butnot after the time allowed for the assessment of income tax. In mostinstances, this assessment period ends 3 years after the due date ofyour income tax return. If you go with the customer to the event, you must treat the costof the tickets as an entertainment expense. You cannot choose, in thiscase, to treat the cost of the tickets as a gift expense. Figure B. When Are Local Transportation Expenses Deductible?