Business Expense Accounting for Gift Card Purchases

2 Replies

Hi Everyone,

I have been browsing the forums here for several months and they have been extremely helpful as I start out in real estate investing. This is my first post.

I have a question relating to accounting/bookkeeping but I'm still in the process of finding an accountant to work with. Here is my 2 part question:

1) I recently bought some Lowe's gift cards at a discounted price. I bought several $100 gift cards for $90 each in anticipation of buying materials for the house that I'm about to rent out. If I went and bought $100 worth of materials with one of these gift cards, would I be able to expense $100 even though I only spent $90? The receipt would say that I spent $100, but it would also indicate that I used a gift card. How would I document this in Quickbooks?

2) I also have some Lowe's gift cards that were given to me as gifts. Am I allowed to deduct any business expenses that these are used for?

Thanks in advance,

Joe

Hi Joe! / Not a CPA, listen to me at your own risk

1) Hmm, how about we take your question to the extreme. You bought a discounted gift card for $900,000 and then purchased a million dollars worth of goods. Then you would use the phantom expense difference of $100,000 as a write down against your rental income or capital gains profits. I would err to the side of you can only claim the $90.00.

2) If they are strictly used for your business, you can.

I'm not an accountant - but this is how I would do it. As long as you used the gift cards all up and promptly, I would probably staple your gift card receipts (showing you paid $90) to all your receipts of items purchased, and then just put it all in as one general journal entry with the $90 to your capital account (or if it came our of your business out of your biz checking account), and then the items you purchase multiplied by 0.9 either to repairs OR to increase the basis of the improvements which you would then depreciate.

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