Also known as: lavish · extravagant · waste · extravagant waste
Written by attorneys · grounded in primary & secondary sources — see below
An expense level for food or beverages that exceeds reasonable costs under the circumstances.
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Lumen Capital operates a disposal facility and hosts a client dinner to negotiate acceptance of out-of-state hazardous waste. The firm spends several thousand dollars on the meal. The cost exceeds reasonable levels under the circumstances even though the underlying surcharge rule is at issue in the transaction.
Lorenzo Lugo holds a fee tail estate and meets with counsel over dinner to discuss whether cutting timber would constitute waste. The firm bills the meal as a business expense. The cost exceeds reasonable levels under the circumstances.
Linden Bank finances a local waste processor and takes a client to an expensive restaurant to discuss compliance with an in-state processing requirement. The bank claims the meal as a deductible business expense. The cost exceeds reasonable levels under the circumstances.
Lakewood Manufacturing sends executives to a high-end dinner with municipal officials to explore directing waste to a government-owned facility. The company seeks to deduct the expense. The cost exceeds reasonable levels under the circumstances.
The determination is made under the circumstances of the particular meal. Factors include the cost relative to the business purpose and local norms for similar meals.
No. The taxpayer or an employee must be present, but the expense must still satisfy the separate requirement that it not be lavish or extravagant under the circumstances.
The limit is applied first. Only expenses that are not lavish or extravagant and that satisfy the presence requirement may then be subjected to the fifty-percent reduction under section 274(n).