114 T.C. No. 14
UNITED STATES TAX COURT
SUTHERLAND LUMBER-SOUTHWEST, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23936-97. Filed March 28, 2000.
P provided its employees with the use of the
company-owned aircraft for nonbusiness flights. P
notified its employees to report the value of the
flights as imputed income. P deducted the expenses
incurred in providing the flights. R, relying on sec.
274(e)(2), I.R.C., determined that deductions for
expenses incurred in providing employees with
nonbusiness flights on a company-owned airplane are
limited to the amount reported as imputed income to the
recipient employees. P contends that its expense
deductions are not subject to sec. 274, I.R.C., or, in
the alternative, if subject to sec. 274, I.R.C., are
excepted from the restriction of sec. 274, I.R.C., by
application of sec. 274(e)(2), I.R.C.
Held: Sec. 274(e)(2), I.R.C., excepts from the
effect of sec. 274, I.R.C., deductions of an employer’s
expenses in connection with an entertainment facility
and does not limit or peg the amount deductible to the
amount reportable by employees; i.e., the value of the
benefit received.
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