Can my friend deduct a gift

by Robert Seltzer, CPA, PFS

My friend runs a daycare center and plans to classify Christmas presents sent to her out-of-town teen nieces as "business promotions." Is that legal?

No, it is not legal. Your friend is trying to deduct a personal expense (a gift to a relative) and claim it as a business expense. There is no business purpose for giving gifts to her nieces. Gifts can be deductible; however, they must have a business purpose and are limited to $25 per person. For example, if your friend gave a Starbucks gift card of $50 to parents of a child she cares for, that would be legal. Since there would be a business purpose and since there are two parents, the $50 gift would be within the rules, and she could deduct the entire $50.

Rob Seltzer is principal of Robert Seltzer, CPA, PFS, in Beverly Hills. You can reach him at (310) 278-9944(310) 278-9944.

Have a question for a CPA? Ask it here.