OCR Text |
Show Holiday business gifts By KENNETH J. ROSE Business Counselor Rose & Associates Holiday gift-giving through your business is a popular and natural part of your business activities. To be able to claim all of them as business busi-ness deductions, however, it is important im-portant to follow some important guidelines. First, you will have to establish that there is a viable business relationship rela-tionship and that the expenses meet the "ordinary and necessary" test. A customer or an employee meets the definition as a direct business relationship. A gift to them would be deductible. Even a major prospective customer or client wou'd meet the test. The spouse or children of a customer or employee are considered to have an indirect business relationship with you, so gifts given to them would also be deductible. Next you have to be able to show that the gift given has affected your business income either in the past or in the future. Keep in mind that if you can't show this relationship or that your business was directly affected af-fected by the gift-giving, your deduction may not be allowed if questioned by the IRS. The value of the gift cannot exceed ex-ceed $25, and you can't give gifts totalling more than $25 to any one person during the course of the year. You and your spouse, if you are both involved in the business, or partners count as one for this test There are a couple of exceptions to this value test. Specialty advertising advertis-ing items such as calendars, pen sets, desk sets and other similar items that have your business name permanently imprinted or inscribed, that are less than $4 in value are not counted toward the $25 limit. These must be for general distribution to all of your customers. Employee awards given in the form of tangible personal property that do not exceed $400 in value and are awarded to the employee for productivity, length of service, or safety achievement are also deductible and do not count toward the $25 gift limitation. Length -of -service awards cannot be given to employees that have been with your company less than five years or to an employee that has received a lcngth-of-scrvice award in any of the preceding four years. Again, if you have questions about the rules consult your tax advisor ad-visor or business counselor. It's always better to find out first rather than do it wrong and have the deduction disqualified by the IRS. 1 i |