Deductibility of referral fees, etc.

[Arlin Hall]

Someone asked:

"are discounts to Piano Dealers deductible? conceivably they might be
considered referal fees because they allow access to the piano service
market. "

They certainly have the net effect of referral fees.  Say for example, if
your normal price is $75.  You pay a referral fee to someone of $10 for the
tuning.  You book both the $75 revenue for the tuning, and the expense of
the $10 referral fee, for a net of $65 income for that transaction.  Say you
negotiate $65 fee with a piano dealer.  You could either just book the $65
straight, or book the normal $75, then show a discount of $10, still showing
the same net of $65.  The discount would be treated as a reduction of
revenue on your Schedule C, just like an expense. I could make a strong
argument that on your invoice to the piano dealer you would want to show the
whole price of $75, and the discount of $10, totalling down to the net of
$65.  That way every time he sees your invoice he has a reminder that you
are cutting him a deal.  (Hopefully in exchange for continued steady
business and additional referrals).

Arlin