S Corp reimbursing M&IE per diem rate to shareholder

[JDW]

S Corporation is reimbursing to 100% shareholder full daily federal M&IE per diem rate for out of town business travel and in turn sometimes the S Corp bills their client for the per diem costs. Is only 50% of the M&IE per diem amount reimbursed to the shareholder deductible by the S Corp, or is 100% deductible? Thank you for assistance.

[jsamans]

S Corporation is reimbursing to 100% shareholder full daily federal M&IE per diem rate for out of town business travel and in turn sometimes the S Corp bills their client for the per diem costs. Is only 50% of the M&IE per diem amount reimbursed to the shareholder deductible by the S Corp, or is 100% deductible? Thank you for assistance.

Only 50% is deductible to the S-Corp.

[Snaggletooth]

Disagree

To the extent meals are reimbursable, they are 100% deductible so long as the reimbursement is claimed as revenue.

The meals that are NOT directly reimbursable, are only 50% deductible.

[TaxGuyBill]

To the extent meals are reimbursable, they are 100% deductible so long as the reimbursement is claimed as revenue.

The meals that are NOT directly reimbursable, are only 50% deductible.

If it is a "reimbursement" under an accountable plan, it is not income to the shareholder. I agree with Jsamas; for tax purposes, only 50% of the meal reimbursement is deductible by the corporation.

[Snaggletooth]

1986 Tax Code Changes

If there is an accountable plan, such as reimbursing employees, someone has to take the 50% hit.

If the coverage for the meals is part of a negotiated agreement, and is shown as revenue, the meals are 100% deductible. Some of you may not remember the carnage which happened with the 1986 tax law changes.

Politically, there was pressure on the govt to do something about allowing the "three-martini lunch" when the typical American couldn't deduct a baloney sandwich. So, enter the 1986 rewrite of the code, reducing all meals to 50% deductibility.

Immediately, companies who had contracts with the Dept of Defense, Federal & State Agencies, etc., prepared additional billings to cover the cost of not being able to deduct meals 100%. Federal Law guarantees contractors the right to do this under "force majeure" where sudden changes in legislation or other extreme economic factors create a sudden impact on existing contracts, and this right is also part of common law recognized everywhere whether in statute or not.

The dollar impact on the Federal government alone was amounting to millions, and the rewrite of the new code was addressed. Speaking from the perspective of someone who has years of experience in this area, contractors (and their employees) are allowed 100% deduction for meals if they are directly chargeable to a reimbursed contract, and 50% if not directly chargeable.