<prompt> Human: Is it considered income? Is it a non-deductible expense? Seems like a Catch-22.EDIT:I can make it even more simple. Im a LLC, taxed as a disregarded entity. Im both the Employee and Employer in this situation. Lets say I Employee have spent 5,000 in meals. I Employee submit an expense report for 5,000 to myself Employer, then I Employer write a check to myself Employee for 5,000. I Employer deduct 50 of 2,500 as a deductible business expense. However, I Employee received 5,000.Is there any tax consequence for the remaining 2,500 I Employee have received but I Employer can not deduct as a business expense?If not, is it assumed that I Employee would have paid tax on the original 5,000 spent in meals prior to ever submitting an expense report to myself Employer?  <response>: How is this a catch 22? Not everything a business does is a deduction 