Sponsorships are technically not charitable giving; they are an advertising or promotional expense to the business. It requires only a modest amount of planning to gain full deductibility of monies paid to non-profit organizations and other social groups.
Today I have a very special guest I would like you to meet: George M. Cohan. George has been a regular fixture of my practice from nearly the first day. But he has one serious problem; he hates keeping business records.
There is a very good reason why Cohan doesn’t keep good records of his business expenses. He is a very famous Broadway actor. He also likes to enjoy his fame.
Well, the IRS came knocking and since most of his receipts were missing the expenses were disallowed. Cohan might be lax when it comes to keeping business records, but he can fight like a pit bull in the hot sun after a pair of double espressos. Our good friend was headed to court.
The IRS felt they had it in the bag. Unfortunately, the IRS had an education coming. The 2nd Circuit US Court of Appeals settled the case in our good friend’s favor. The court said when receipts are absent it would be impossible to get a perfectly accurate number. However, the court continued, allowing nothing is inconsistent when it is obvious there were expenses.
This court ruling happened March 3, 1930 and my office has never been the same.