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CLEAR BUSINESS SETTING TEST Definition & Legal Meaning

Definition & Citations:

An IRS or corporate test applied to determine the deductibility of business expenses related to entertainment and dining. The test checks that no other motive is involved when incurring these expenses other than to further the interest of the business. The test is applied to eligible expenses can include any entertainment or dining expenses related to the generation of a firm’s publicity, price rebates for restaurant or hotel customers, and the expense of renting a display area at a convention. The test includes the conditions that the payer must be physically present at the event and that there not be other distractions occurring, such at a sporting event or other such activities. Expenses are usually determined to be nondeductible if associates and personal acquaintance are the only ones present at the event.

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