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I'm a sole proprietor and gave out around 1000$ in prizes for my business' event, either through paypal or e-transfer. How can I deduct this as a business expense? There's not really a receipt.

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    what country? Also what was the maximum prize? You may have been required to report the prize money to the tax authorities.
    – mhoran_psprep
    Jan 29, 2022 at 20:54
  • Canada, max prize was 500CAD$. What do you mean by report the prize money?
    – goodbyeworld123
    Jan 29, 2022 at 23:26
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    The revenueers want to know when people get money, people are getting money and they want those people to pay taxes on it. This is why game show contestants that win occasionally come to regret it (particularly when they win cars)
    – jmoreno
    Jan 29, 2022 at 23:40
  • I see, but isn't that the prize receiver's responsibility to to announce that on their income sheets? For me it's just a business expense.
    – goodbyeworld123
    Jan 29, 2022 at 23:42
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    Is this a promotional event? Who is it that might win this prize?
    – DJClayworth
    Jan 30, 2022 at 4:15

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For an expense to be a valid business expense it has to be "A necessary part of doing business". In other words it has to be something that benefits the business. Things like wages, advertising, office rental, buying computers, all obviously qualify if they are needed to do the business or help it do it better.

Whether giving out a prize qualifies is going to depend on circumstances. Something where potential customers give you their contacts and you give one of them a prize would probably qualify - it generates contacts that will increase the sales. On the other hand if you are giving out a prize for some competition that isn't really related to your field then that isn't going to benefit your business, and it won't be deductible.

If you want to sponsor an educational prize it may be easier to make it a charitable donation rather than a business expense. Most educational organizations are set up as charities and can accept donations and give tax receipts.

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