Extraordinary promotional expenditures often attract scrutiny from the Internal Revenue Service (IRS), particularly when the amount paid for a single item appears disconnected from its intrinsic value. While U.S. tax law allows aggressive marketing strategies, it imposes limits grounded in business purpose, the “ordinary and necessary” expense rule, and overall commercial reasonableness. A widely reported international example involving a multimillion-dollar bluefin tuna purchased primarily for publicity offers a useful framework for understanding how U.S. businesses can deduct extreme promotional “loss leader” expenses.
On January 5, 2026, Kiyoshi Kimura — internationally known as Japan’s “Tuna King” and owner of the Sushi Zanmai restaurant chain — made global headlines by purchasing a 243-kilogram giant bluefin tuna at Tokyo’s Toyosu Market for approximately ¥510.3 million, or roughly $3.2 million. The fish was later distributed across the chain’s restaurants and sold at ordinary menu prices, with individual pieces of sushi priced at only a few dollars each.
From a pure inventory standpoint, the economics were staggering. The effective cost exceeded $6,000 per pound, guaranteeing a substantial loss on the fish itself. Yet Sushi Zanmai has long used this approach as a deliberate branding strategy. By securing the most expensive tuna at the year’s first auction, the company generated extraordinary global media exposure, reinforcing brand prestige and driving customer traffic. Coverage appeared in Reuters, Associated Press, BBC, CNN, The Guardian, Food & Wine, and other major outlets.
Deductibility Under U.S. Federal Income Tax Law
If a U.S. business adopted a comparable promotional strategy, the central tax issue would be deductibility under Internal Revenue Code (IRC) §162. This provision permits deductions for “ordinary and necessary” expenses paid or incurred in carrying on a trade or business. Advertising and marketing expenses are generally fully deductible, even when they do not generate immediate revenue.
The IRS and U.S. courts have consistently recognized that businesses may spend aggressively on promotion to build goodwill, brand recognition, and long-term profitability. Poor business judgment alone does not justify disallowance. However, disputes may arise where an expense appears excessive or lacks a clear connection to income-producing activity.
In a case like the bluefin tuna purchase, the IRS would likely distinguish between the fair market value of the fish as inventory and the premium paid for publicity. The underlying fish would typically be treated as cost of goods sold, while the excess amount would be characterized as an advertising or promotional expense. Given the scale of media exposure and brand enhancement, a strong argument exists that the full amount was “necessary” within the meaning of §162, even if inefficient on a per-unit basis.
Loss Leaders and Profit Motive
Selling the tuna at ordinary menu prices illustrates the classic “loss leader” strategy. U.S. tax law does not require each transaction to be profitable in isolation. Instead, courts evaluate whether the overall business is conducted with a genuine profit motive. Here, losses on the featured product are offset by increased foot traffic and higher-margin ancillary sales, such as beverages and other menu items, supporting deductibility.
Distinction From Meals and Entertainment Expenses
It is critical to distinguish this type of promotional expenditure from meals and entertainment expenses subject to limitation or disallowance under IRC §274. Where the dominant purpose of the expenditure is broad-based advertising directed at the general public — rather than entertaining specific clients — the cost should be treated as advertising under §162, preserving full deductibility.
U.S. Sales Tax Considerations
Sales tax rules are determined at the state and local level. In most states, restaurants do not pay sales tax on raw food purchased for resale. However, prepared food sold to customers is generally subject to state and local sales tax, regardless of promotional pricing. A U.S. restaurant using this strategy would therefore collect and remit sales tax on retail sushi sales in the ordinary course.
Pro Tax Tips
- Maintain contemporaneous documentation showing that the promotional expense was designed to generate brand recognition and long-term revenue, including media coverage and marketing strategy records.
- Clearly separate inventory costs from advertising premiums in accounting records to support deductibility under IRC §162.
- Avoid misclassifying public-facing promotional expenses as meals or entertainment, which may trigger limitations under IRC §274.
- Be prepared to demonstrate overall profitability and business purpose if the IRS questions an extreme “loss leader” expense.
Frequently Asked Questions (FAQ)
Can a U.S. business fully deduct an extreme promotional expense?
Yes. If the expense qualifies as an ordinary and necessary business expense under IRC §162 and is supported by a clear commercial purpose, it may be fully deductible.
Does selling a product at a loss jeopardize deductibility?
No. Loss leaders are permitted under U.S. tax law as long as the overall business is operated with a genuine profit motive.
Could the IRS recharacterize part of the expense?
Yes. The IRS may scrutinize whether a portion of the cost relates to inventory rather than advertising, making proper documentation essential.
Are sales taxes affected by promotional pricing?
Generally no. Sales tax applies to prepared food sold to customers at retail, even if prices are unusually low.
Disclaimer: This article provides general information based on current U.S. federal tax law and administrative guidance, which may change and may be applied retroactively. It does not constitute legal or tax advice. Every tax situation is fact-specific. Readers should consult a top tax lawyer or qualified tax professional for advice tailored to their particular circumstances.