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We start our inquiry with the relevant text of section
274(n).7 Connecticut Natl. Bank v. Germain, 503 U.S. 249,
253-254 (1992); TVA v. Hill, 437 U.S. 153 (1978); United States
v. American Trucking Associations, 310 U.S. 534, 543-544 (1940).
Section 274(n) provides in part:
(1) In general.--The amount allowable as a
deduction under this chapter for--
(A) any expense for food or beverages, and
* * * * * * *
shall not exceed 80 percent [8] of the amount of such
expense or item which would (but for this paragraph) be
allowable as a deduction under this chapter.
(2) Exceptions.--Paragraph (1) shall not apply to
any expense if--
(A) such expense is described in
paragraph * * * (8) * * * of subsection
(e).[9]
(B) in the case of an expense for food
or beverages, such expense is excludable from
the gross income of the recipient under
section 132 by reason of subsection (e)
thereof (relating to de minimis fringes),
From this text, we find that the mandate of the Congress is
clear. Petitioners may not deduct the full cost of their
7 Sec. 274(n) was added to the Code on Oct. 22, 1986, as
sec. 142(b) of the Tax Reform Act of 1986, Pub. L. 99-514,
100 Stat. 2085, 2118.
8 Sec. 13,209(a) of the Omnibus Budget Reconciliation Act of
1993, Pub. L. 103-66, 107 Stat. 312, 469, changed this amount to
50 percent for taxable years beginning after Dec. 31, 1993.
9 Sec. 274(e)(8) provides an exception for "Expenses for
goods or services * * * which are sold by the taxpayer in a bona
fide transaction for an adequate and full consideration in money
or money's worth.”
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