Clear Business Setting Test


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.

BREAKING DOWN '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.

  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. Earnings Stripping

    Earnings Stripping is a commonly-used tactic by multinationals ...
  5. Earnings Before Interest & Tax ...

    An indicator of a company's profitability, calculated as revenue ...
  6. Tax Deductible Interest

    A borrowing expense that a taxpayer can claim on a federal or ...
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. Taxes

    Tax Breaks For Volunteering

    Your volunteer ventures could earn you some welcome tax deductions, along with the satisfaction of helping others.
  6. Taxes

    Six Ways Your Tax Preparer Knows You’re Lying

    Cheating on your taxes is asking for trouble. You might get away with it, but you’re playing with fire and likely to get burned.
  7. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  8. Taxes

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.
  9. Taxes

    2016 Tax Code Changes Add Some Wiggle Room

    It's never too early to prepare for tax season. Next year features a host of tax law changes. Check our handy list to see which ones apply to you.
  10. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  1. Is dental insurance tax deductible?

    Dental insurance premiums may be tax deductible. To be deductible as a qualifying medical expense, the dental insurance must ... Read Full Answer >>
  2. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
  3. Are Flexible Spending Account (FSA) contributions tax deductible?

    The contributions you make to your Flexible Spending Account (FSA) are not tax-deductible because the accounts are funded ... Read Full Answer >>
  4. Do Flexible Spending Accounts (FSAs) expire?

    Flexible Spending Accounts (FSAs) do expire and are considered to be a "use it or lose it" type of plan. They are savings ... Read Full Answer >>
  5. Do 401k contributions reduce AGI and/or MAGI?

    Traditional 401(k) contributions effectively reduce both adjusted gross income (AGI) and modified adjusted gross income (MAGI). ... Read Full Answer >>
  6. Is homeowners’ insurance tax deductible?

    While your fire or homeowners' insurance premiums may be included in your property payments, they are nondeductible expenses, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center