Deductible Entertainment Expenses
May 13th, 2010
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Question: Paid with Guaranteed Payments – can I deduct SE business expenses?
I am getting paid as an independent contract in a business that I own a small portion of, and my K-1 reports this payment as Guaranteed Payments to Partner. I know the method of reporting is correct, but since I am filing as a self-employed independent contractor, I would hope to be able to take my self-employment business expenses (expenses that the company did not reimburse me for) as deductions. Expenses such as car, travel, meals & entertainment, advertising/promotional, etc.
The argument that I would make is that the earnings I received as Guaranteed Payments to Partner would not have been possible without incurring business expenses along the way, thus the expenses should be deductible. My expenses equate to 18% of my Guaranteed Payments income, so this will be a significant deduction.
Is this logic correct? Can anyone point to somewhere in the code that allows this, or just give me clarity? I can’t find anything online or in the code that allows or disallows this.
Answer: I believe that you are correct. I would further suggest that you go to the IRS website and look for Schedule C and its accompanying instructions. I have reason to believe that if you examine this schedule and the instructions for filling out this form the answer(s) to your question will become self apparent.
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