8.11.14 | Nonprofit Tax | Blog Posts
Gift Week: Business Gift Limits
Situation GW1: The President of Vietnam Outreach Ministries (VOM) wants to give a “thank-you” gift to a business associate. He finds a print at a Christian bookstore that is normally priced at $70, but is on sale for $24.95. Additionally, he has an engraved label made and attached to the frame for $8, sales tax is $2, and gift wrapping is $5. The total amount charged on the VOM credit card it $39.95. The president should be within the $25 “business gift” limit because incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit.print
From IRS Publication 463 (page 14):
Incidental costs. Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit.
A cost is incidental only if it does not add substantial value to the gift. For example, the cost of gift wrapping is an incidental cost. However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit.