Entertainment Facility Rule
The entertainment facility rule is wicked. The rule denies you any deduction “[w]ith respect to” a facility “used in connection with” any activity generally considered to constitute entertainment, amusement, or recreation.1
In other words, even if you otherwise satisfy all the requirements for deducting Entertainment Expenses, you get zilch for expenses “with respect to” an entertainment facility.
Entertainment facilities include yachts, hunting lodges, fishing camps, swimming pools, tennis courts, and even automobiles and airplanes if used for entertainment.2
Out-of-pocket exception. Out-of-pocket expenses incurred during business entertainment are deductible even if the entertainment occurs in or on an entertainment facility.3
For articles in our Tax Reduction Letter on maximizing entertainment deductions, including strategies for dealing with the entertainment facility rule, click on Entertainment in our Browse by Topic finding tool.
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1 IRC Section 274(a)(1)(B).
2 Reg. Section 1.274-2(e)(2).
3 Reg. Section 1.274-2(e)(3)(iii).
