An employee at your firm is scheduled to meet for dinner with an employee of another firm to discuss a joint business venture, but cannot attend. How would this dinner be categorized?

An employee at your firm is scheduled to meet for dinner with an employee of another firm to discuss a joint business venture, but cannot attend. How would this dinner be categorized?

• A. A gift
• B. A legitimate business expense
• C. Compensation
• D. Normal business practice

Answer: (A)

In this scenario, categorizing the dinner as a gift is appropriate because it implies that one party is offering a meal to another, potentially without the expectation of a direct business exchange occurring in that moment. Since the employee cannot attend the dinner and it is being offered on behalf of another firm, it suggests that the expense is not being incurred directly as a part of the business’s ongoing operations or in pursuit of a joint venture effort at that time. For a dinner to qualify as a legitimate business expense, it typically needs to be directly associated with a business purpose and not merely as a way to entertain or gift someone without expectation of immediate business benefit. In this case, given that one employee is not present, it loses its classification as a legitimate business expense. Compensation would imply payment or remuneration for services, which is not the nature of a dinner invitation, nor does it entail providing information about business operations or results. Normal business practice refers to actions commonly taken within a business context, but in this particular case, the absence of the employee complicates the idea of the dinner being a standard practice aimed at fostering business relationships or negotiations. Thus, categorizing the dinner as a gift captures the essence of the situation, given the context and the lack of

In this scenario, categorizing the dinner as a gift is appropriate because it implies that one party is offering a meal to another, potentially without the expectation of a direct business exchange occurring in that moment. Since the employee cannot attend the dinner and it is being offered on behalf of another firm, it suggests that the expense is not being incurred directly as a part of the business’s ongoing operations or in pursuit of a joint venture effort at that time.

For a dinner to qualify as a legitimate business expense, it typically needs to be directly associated with a business purpose and not merely as a way to entertain or gift someone without expectation of immediate business benefit. In this case, given that one employee is not present, it loses its classification as a legitimate business expense.

Compensation would imply payment or remuneration for services, which is not the nature of a dinner invitation, nor does it entail providing information about business operations or results.

Normal business practice refers to actions commonly taken within a business context, but in this particular case, the absence of the employee complicates the idea of the dinner being a standard practice aimed at fostering business relationships or negotiations.

Thus, categorizing the dinner as a gift captures the essence of the situation, given the context and the lack of