100% Meals Deduction for Business Traders?

Discussion in 'Professional Trading' started by shortie, Sep 10, 2009.

  1. Meals for the convenience of the employer
    IRS Code §119 allows for 100% deductible meals when they are for the convenience of the employer and they are furnished on the business premises of the employer. The business premises must pass one of two tests: a "spatial" definition, which focuses on the physical extent of the employer's property or a "functional" definition, which focuses on the performance of services by the employee.

    The meals should not be given as a form of extra compensation or as perquisites (perks). Examples of why meals would be 100% deductible and also fully excludable from the employee's income:

    * Very short meal period allowed
    * No available eating facilities outside the business premises
    * Employee must remain on site for business reasons (to meet customers or to trade securities, for example)
    * To attend mandatory business meetings

    The meals must be just that: meals. Cash allowances or reimbursements for meals (and lodging for that matter) must be included in gross income by the employee.

    The family may join the employee for the meals. §119(a) specifically states that your spouse and other dependents may partake in the free meals.

    There are some misunderstandings as to if only c-corporations are allowed this as a deduction or if other entities and self-employed businesses qualify. Also whether "employees" includes owners, partners (§703(a)(2)(E) & §707(a)) , LLC members, managers, shareholders (§1372) and officers can also be subject to debate. Non-employees are not covered (Weeldreyer v. Commissioner; Schmidt v. Commissioner; Tschetter v. Commissioner; Waterfall Farms, Inc. v. Commissioner; Armstrong v. Phinney, 5th Cir., 1968.)


    how much do you guys deduct as far as every trading day breakfast+lunch is concerned? the way i read the above is that traders can and should deduct 100% of their meals during trading hours.

    any live examples where IRS questioned your meals? how to calculate meal expenses if it is home cooked (e.g. sandwich).
  2. trendy


    Hmmm, I prefer to fly under the radar of the IRS. No meals or home office deductions for me.