A real estate agent's S-corp customarily gives client gifts for referrals or as closing gifts. Can lotto tickets be deducted by the business as a mkting expense or gift?

[AmandaR1 · Accepted solution]

No, lottery tickets given as a gift would not be deductible. However, they can be deductible, as long as the recipient is aware that it's considered a payment and must be reported as income. 

Regardless of industry, gifts in the course of business are treated as payments. You can deduct the amount as contractor expense if the recipient is reporting it as income. 

There are some exceptions for gifts under $25 to one taxpayer, in one year. Also, if the items are of small value and have your business logo on them, then they can be excluded too. See this info at the IRS: https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses...

[catfruit]

Thank you for the response.  The lottery ticket cost only $1, so it would seem that this gift to the client would be an exception since it meets the below $25 threshold. Or are lottery tickets simply not deductible unless the recipient is aware that it's a payment and must be reported as income?  The intent of this gift is gratitude to the client for choosing the real estate agent's business.  Much thanks for the clarity.