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Page 27 of 59 of Publication 463 17:36 - 21-JAN-2010 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. the amount spent, the supporting evidence can To determine the cost of individual tickets, divide the Internal Revenue Code. Generally, this be circumstantial, rather than direct. For exam- the total cost (but not more than face value) by means you must keep records that support your ple, the nature of your work, such as making the number of games or performances in the deduction (or an item of income) for 3 years from deliveries, provides circumstantial evidence of series. You must keep records to show whether the date you file the income tax return on which the use of your car for business purposes. In- you use each ticket as a gift or entertainment. the deduction is claimed. A return filed early is voices of deliveries establish when you used Also, you must be able to prove the cost of considered filed on the due date. For a more the car for business. nonluxury box seat tickets if you rent a skybox or complete explanation of how long to keep rec- other private luxury box for more than one event. ords, get Publication 583, Starting a Business Sampling. You can keep an adequate record See Entertainment tickets in chapter 2. and Keeping Records. for parts of a tax year and use that record to You must keep records of the business use prove the amount of business or investment use Combining items. You can make one daily of your car for each year of the recovery period. for the entire year. You must demonstrate by entry in your record for reasonable categories of See More-than-50%-use test in chapter 4 under other evidence that the periods for which an expenses. Examples are taxi fares, telephone Depreciation Deduction. adequate record is kept are representative of calls, or other incidental travel costs. Meals the use throughout the tax year. should be in a separate category. You can in- Reimbursed for expenses. Employees who clude tips for meal-related services with the give their records and documentation to their Example. You use your car to visit the of- costs of the meals. employers and are reimbursed for their ex- fices of clients, meet with suppliers and other Expenses of a similar nature occurring dur- penses generally do not have to keep copies of subcontractors, and pick up and deliver items to ing the course of a single event are considered a this information. However, you may have to clients. There is no other business use of the single expense. For example, if during entertain- prove your expenses if any of the following con- car, but you and your family use the car for ment at a cocktail lounge, you pay separately for ditions apply. personal purposes. You keep adequate records each serving of refreshments, the total expense • You claim deductions for expenses that during the first week of each month that show for the refreshments is treated as a single ex- are more than reimbursements. that 75% of the use of the car is for business. pense. Invoices and bills show that your business use • Your expenses are reimbursed under a continues at the same rate during the later uses of your car that can be considered part of a nonaccountable plan.You can account for severalCar expenses. weeks of each month. Your weekly records are single use, such as a round trip or uninterrupted • Your employer does not use adequate ac- representative of the use of the car each month business use, with a single record. Minimal per- counting procedures to verify expense ac- and are sufficient evidence to support the per- sonal use, such as a stop for lunch on the way counts. centage of business use for the year. between two business stops, is not an interrup- • You are related to your employer as de- Exceptional circumstances. You can satisfy tion of business use. fined under Per Diem and Car Allowances, the substantiation requirements with other evi- in chapter 6. Example. You make deliveries at several dence if, because of the nature of the situation in which an expense is made, you cannot get a different locations on a route that begins and nonaccountable plans are discussed in chapter, andadequate accounting,Reimbursementsends at your employer’s business premises and receipt. This applies if all the following are true. 6.that includes a stop at the business premises • You were unable to obtain evidence for an between two deliveries. You can account for element of the expense or use that com- these using a single record of miles driven. Examples of Records pletely satisfies the requirements ex- Gift expenses. You do not always have to plained earlier under What Are Adequate Examples of records that show the information Records. record the name of each recipient of a gift. A you need to keep for different types of expenses general listing will be enough if it is evident that • You are unable to obtain evidence for an you are not trying to avoid the $25 annual limit Table 6-3. They are part of the illustrated exam- andTable 6-2are included in this publication as element that completely satisfies the two on the amount you can deduct for gifts to any rules listed earlier under What if I Have one person. For example, if you buy a large ples shown at the end of chapter 6. Incomplete Records. number of tickets to local high school basketball • You have presented other evidence for the games and give one or two tickets to each of element that is the best proof possible many customers, it is usually enough to record a under the circumstances. general description of the recipients. 6. Allocating total cost. If you can prove the Destroyed records. If you cannot produce a total cost of travel or entertainment but you can- receipt because of reasons beyond your control, not prove how much it cost for each person who you can prove a deduction by reconstructing participated in the event, you may have to allo- your records or expenses. Reasons beyond cate the total cost among you and your guests How To Report your control include fire, flood, and other casu- on a pro rata basis. To do so, you must establish alty. the number of persons who participated in the event. This chapter explains where and how to report Separating and Combining An allocation would be needed, for example, the expenses discussed in this publication. It Expenses all of your guests. See Allocating between busi- them under accountable and nonaccountableif you did not have a business relationship withdiscusses reimbursements and how to treat ness and nonbusiness in chapter 2. plans. It also explains rules for independent con- This section explains when expenses must be tractors and clients, fee-basis officials, certain kept separate and when expenses can be com- If your return is examined. If your return is performing artists, Armed Forces reservists, and bined. examined, you may have to provide additional certain disabled employees. The chapter ends information to the IRS. This information could be with illustrations of how to report travel, enter- Separating expenses. Each separate pay- needed to clarify or to establish the accuracy or tainment, gift, and car expenses on Forms 2106 ment is generally considered a separate ex- reliability of information contained in your rec- and 2106-EZ. pense. For example, if you entertain a customer ords, statements, testimony, or documentary or client at dinner and then go to the theater, the evidence before a deduction is allowed. dinner expense and the cost of the theater tick- ets are two separate expenses. You must record How Long To Keep them separately in your records. Records and Receipts Season or series tickets. If you buy sea- son or series tickets for business use, you must You must keep records as long as they may be treat each ticket in the series as a separate item. needed for the administration of any provision of Chapter 6 How To Report Page 27