November is National Peanut Butter Lover’s Month. I grew up on peanut butter and jelly sandwiches. I still have one of these comfort, stand-by sandwiches every once in a while. And I love peanut butter cookies! .. Can you deduct peanut butter? Not if it is just your own, or your children’s meal. And chances are you’re not going to offer a peanut butter sandwich to your business client. But you could decide to serve a fancied up sandwich at a business get-together. Think about a working lunch or a special afternoon tea type theme to your business meeting. .. If you run a sandwich shop, peanut butter can be an ingredient in one of your menu items. If you run a daycare center, you will certainly be serving this staple at lunch. Cookies can become a business gift. And maybe you want to have your clients over for an afternoon celebration.  Of course, if your guest list includes someone with a peanut allergy, peanut butter will not be on the menu. But then this peanut butter could be the cause of a medical deduction. So there can be several ways peanut butter and taxes really are related. .. The IRS loves the words “ordinary and necessary”, “generally” and “usually”. To be deductible your meal or entertainment expense must be “directly related to” or “associated with” the active conduct of a trade or business. It can also be for the production or collection of income. It cannot be lavish or extravagant. It must be reasonable considering the facts and circumstances. .. Do you remember the five Ws of journalism? Who, what, when, where, why and then add how much you spent.. Who did you entertain? What did your discuss. When did you have this meal? Where did you go? What was the business purpose or what did you want to talk about at this restaurant? And how much did you spend? Your deduction can include the cost of the food, beverage and tip, but is limited to 50%. The cost of your own meal at a restaurant is not deductible. Meals with coworkers or business associates are not deductible unless you can show a clear business purpose. .. You must show that the main purpose for this meal or entertainment was for business; that you engaged in business during this meal or activity. You must also have more than a general expectation of receiving income or some other specific business benefit in the future. .. Instead of “directly related”, where you discuss business over a meal, your business discussion can be “associated with” the meal or entertainment. How much talking could possibly go on during a concert, at the theater or at a rousing sporting event or a backyard bar-b-que? If you are entertaining at your home, be sure to have a guest book for your records. Have each of your guests sign in. .. If the business discussion or transaction is substantial (and directly before or after the meal or entertainment) it can be deductible. There is no requirement that you spend more time on business than on the meal or entertainment. .. Employers have exceptions to the 50% deduction limit. If you provide meals to more than half of your employees on your business premises and for your convenience (not the convenience of the employee), those meals are a 100% deductible fringe benefit. Employer provided social or recreational expenses, like a company party or picnic, for the benefit of employees who are not highly compensated employees, are 100% deductible. .. I can’t emphasize enough your need to keep adequate records. This is for your tax audit protection.