Clear Business Setting Test

AAA

DEFINITION of 'Clear Business Setting Test'

A test for deductibility of business-related dining and entertainment expenses. The clear business setting test mandates that there can be no other motive for incurring these expenses except to further the taxpayer's business. For example, paying dining and entertainment expenses for an associate with whom the taxpayer has no social or personal connection will usually qualify as a deductible business expense.

INVESTOPEDIA EXPLAINS 'Clear Business Setting Test'

Qualifying expenses can include meals and entertainment related to generating publicity, price rebates for regular hotel or restaurant customers, and the cost of renting a display room at a convention. Usually, however, the taxpayer must be present at the function and there cannot be substantial distractions, such as at a nightclub or sporting event. If the associates present are a mixture of business and personal associates, then the costs incurred are also generally nondeductible.

RELATED TERMS
  1. Convention Expenses

    Any travel expenses incurred while at a business convention. ...
  2. Out-Of-Pocket Expenses

    An expense incurred and paid for by an individual for personal ...
  3. Expense

    1. The economic costs that a business incurs through its operations ...
  4. Peter Pan Syndrome

    A regulatory environment in which firms prefer to stay small ...
  5. AG (Aktiengesellschaft)

    AG is an abbreviation of Aktiengesellschaft, which is a German ...
  6. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
Related Articles
  1. Entrepreneurship

    Six Steps To A Better Business Budget

    This easy but essential process helps owners ensure that their businesses can stay afloat.
  2. Entrepreneurship

    Should You Incorporate Your Business?

    Find out how becoming a corporation can protect and further your finances.
  3. Brokers

    Top Tax Deductions For Brokers

    If you are paying out of pocket, you can make your business expenses work for you at tax time.
  4. Retirement

    Avoid An Audit: 6 "Red Flags" You Should Know

    Don't make yourself a target - steer clear of these attention-grabbing tax-filing practices.
  5. Economics

    Corporate Tax Inversion

    U.S. companies like Burger King use corporate tax inversion to take advantage of lower taxes abroad.
  6. Taxes

    How To Deduct All Of Your Charitable Donations?

    Donations made to charitable organizations can reduce your taxable income, thus your overall tax bill. But not all donations qualify to be deductable.
  7. Taxes

    What is Value-Added Tax (VAT) and who pays it?

    Learn about the definition of value-added tax, the necessary circumstances that require a business to pay it and when a business is exempt.
  8. Taxes

    What is the difference between gross income and earned income?

    Being able to distinguish between earned income and gross income is an important tool in preparing for and filing your individual tax returns each year.
  9. Taxes

    What are the differences among gross income, adjusted gross income and modified adjusted gross income?

    Discover how calculating total taxable income is easier when gross income, adjusted gross income and modified adjusted gross income are fully understood.
  10. Taxes

    What is the difference between gross income and taxable income?

    Understanding common tax terms including gross income and taxable income can help individuals navigate tax accounting in an efficient way.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center