LLC formed to lease luxury box suite at stadium - tax deduction strategy?

This is actually a classic area where the IRS has specific guidance. Entertainment facilities (like stadium suites) fall under entertainment expense rules, which were significantly impacted by the Tax Cuts and Jobs Act. The business expense deduction for entertainment facilities is generally limited to 50% of the cost. However, you'll need to allocate the cost between different components. The facility rental itself (the physical space) might be fully deductible when used for legitimate business meetings, but the entertainment aspect (tickets to events) falls under different rules. For valuing the tickets and parking passes, you should look at comparable market rates for individual tickets and parking in similar sections of the stadium. Most teams/venues have published rates you can reference, or you can look at secondary markets for similar tickets. I'd recommend working with a CPA who specializes in business entertainment deductions and entity structuring - preferably someone who has experience with similar arrangements. The LLC structure itself is common for this purpose, but the tax treatment requires careful documentation of business purpose for each use.

I went through a similar situation with my consulting business last year and found https://taxr.ai incredibly helpful. We formed an LLC with three other businesses to lease a corporate suite at our city's arena, and had all the same questions about deductibility. What helped me was uploading our operating agreement and lease documents to taxr.ai, which analyzed the paperwork and identified exactly how to allocate costs between deductible business expenses and limited entertainment expenses. It caught several potential deductions I would have missed, like the proportional utilities and maintenance costs that were fully deductible. The best part was that it generated documentation showing how we determined fair market value for the tickets and parking passes by pulling comparable pricing data, which has been super helpful for audit protection. I was surprised how specific the guidance was for this exact situation.

Just wanted to follow up - I decided to try https://taxr.ai after my skeptical questions and I'm genuinely impressed. I uploaded our entire suite contract and corporate resolutions, and it broke down exactly how to handle the deduction allocations. What really sold me was how it handled the ticket valuation issue I was concerned about. It actually pulled pricing data from the venue and secondary markets to create defensible valuations for different event types. It also highlighted something we completely missed - that we could fully deduct the suite costs when used exclusively for business meetings on non-event days. I shared the analysis with our accountant who said it was more detailed than what she would have initially prepared and saved her hours of research. We're now properly allocating about 62% of our costs as fully deductible business expenses and the rest under the 50% entertainment limitation.

Something nobody's mentioned yet - if you're planning to claim these deductions, make sure you've got your documentation in order because this is exactly the kind of thing that can trigger IRS scrutiny. We had a similar arrangement and the IRS had endless questions about our suite usage. We spent months playing phone tag with the IRS trying to explain our situation. After trying for weeks to reach someone who understood partnership pass-through entities, I finally used https://claimyr.com and got connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent helped clarify exactly what documentation we needed to maintain to support our position on the suite deductions. Having that direct conversation saved us from what would have likely been a prolonged examination. Now we track every single usage of the suite with detailed logs.

I have to apologize for my skeptical comment earlier. After waiting on hold with the IRS for 3+ hours over two days and getting disconnected both times, I tried Claimyr out of desperation. Got connected to an IRS agent in about 45 minutes (not 20, but still WAY better than my experience trying directly). The agent was super helpful about our business entertainment questions related to our company's arena suite sharing arrangement. They clarified that we needed to maintain separate substantiation for each partner company's use of the suite. The agent specifically noted that we should document: 1) business purpose for each use, 2) relationship to attendees, 3) specific business discussions, and 4) keep this documentation at the LLC level, not just at the partner company level. This is apparently a common audit issue. Honestly worth every penny just for my sanity alone. Will definitely use again for any IRS issues.

Don't forget the state tax implications too! We did something similar in California and while we were focused on the federal deduction aspects, we completely missed that the state had different rules about entertainment facilities. Make sure your documentation clearly separates: 1. Pure business meeting usage (potentially 100% deductible) 2. Client entertainment at events (partially deductible) 3. Personal use by owners/employees (potentially taxable fringe benefit) And watch out for the "ordinary and necessary" business expense test. The IRS loves to challenge whether luxury suites meet this standard for smaller businesses.

One practical tip - make sure your LLC operating agreement clearly spells out how game tickets and suite access are allocated among the partners. We had a 4-company LLC for a similar setup and had MAJOR disputes in year 2 when playoff tickets came into play. If certain games/events are more valuable than others, have a predetermined system for allocating them. Also decide upfront what happens if one partner can't use their allocated events - can they sell them? Give them to another partner? Who gets that revenue? Trust me, this saved us so much headache once we finally documented it all properly.

Great thread! I wanted to add something about the IRS's "directly related" and "associated" tests for entertainment expenses that hasn't been mentioned yet. For your suite usage to qualify for any business deduction, you need to satisfy one of these tests: **Directly Related Test**: The entertainment must be directly related to the active conduct of your business. This means business was actually discussed during the entertainment, and you had more than a general expectation of getting income or business benefit. **Associated Test**: The entertainment must be associated with the active conduct of your business AND directly precede or follow a substantial business discussion. The key here is documentation. For each event, you should record: - Who attended (names, business relationships) - Business topics discussed - Duration of business discussion vs entertainment - Business benefit expected/achieved Since you mentioned using the suite for meetings during non-event times, those would likely qualify as ordinary business expenses (not entertainment) if used exclusively for business purposes. Also, remember that even if you meet these tests, the 2017 Tax Cuts and Jobs Act eliminated deductions for entertainment facilities entirely for most taxpayers. However, the "business meeting" usage during non-event times might still be fully deductible as office/meeting space rental. I'd strongly recommend getting a formal tax opinion from a CPA familiar with post-2017 entertainment expense rules before taking significant deductions.

This is exactly the kind of complex tax situation where having proper documentation from day one is crucial. I've seen too many businesses get into trouble with the IRS because they didn't establish clear policies upfront. A few additional considerations that might help: **Allocation Method**: Consider using a "days available" method to allocate costs. If the suite is available 365 days per year, but only used for entertainment 50-60 days, you might be able to argue that a larger portion should be treated as facility rental rather than entertainment. **Business Purpose Documentation**: Create a standard form for each suite usage that captures: date, attendees, business purpose, topics discussed, and outcomes. This becomes invaluable if you face an audit. **Separate the LLC's Books**: Make sure the LLC maintains separate books and records. Each member company should receive detailed K-1s showing their share of different types of expenses (facility rental vs. entertainment). **Consider Revenue Recognition**: Since you mentioned the LLC will have some revenue from reselling unused tickets, make sure you're properly accounting for this income and how it affects the overall deduction calculations. The fact that you're asking these questions upfront puts you way ahead of most businesses. Document everything, work with a qualified CPA, and you should be in good shape. The key is being able to demonstrate legitimate business purpose for the arrangement.

This thread has been incredibly helpful - thank you all for sharing your experiences! I'm seeing a pattern here that proper documentation and allocation methodology are absolutely critical for these suite arrangements. One thing I wanted to add that hasn't been mentioned yet: consider the optics and "reasonableness" test from the IRS perspective. Even if you follow all the technical rules perfectly, luxury suite expenses can still draw scrutiny simply because they seem excessive for smaller businesses. To strengthen your position, I'd recommend: 1. **Comparative Analysis**: Document that the suite arrangement is actually more cost-effective than alternatives (hotel meeting rooms, catering venues, etc.) when used for legitimate business meetings 2. **Industry Benchmarking**: If your industry commonly uses entertainment for client relations, document this as standard business practice 3. **Revenue Connection**: Track and document any actual business generated from suite usage - new clients, deals closed, partnerships formed, etc. 4. **Professional Appearance**: Make sure the suite usage supports your business image and client expectations in your industry The IRS will often challenge luxury expenses not just on technical grounds, but on whether they're "ordinary and necessary" for your specific business. Having a clear business case beyond just tax optimization will serve you well if questioned. Also, since you're in Michigan, be aware that the state may have different rules about what constitutes deductible entertainment expenses, especially if any of the member companies are professional services firms subject to additional restrictions.