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"adequate records" threshold are still entitled to a deduction
for expenses that they can substantiate with other corroborative
evidence. Sec. 1.274-5(c)(3), Income Tax Regs. Usually, this
will consist of the written or oral testimony of the individuals
entertained by the taxpayer. Sec. 1.274-5(c)(3), Income Tax
Regs.
Section 274(e) modifies the requirements of subsection (a) in
permitting a deduction for expenses incurred for food and
beverages that are furnished to individuals under circumstances
generally considered conducive to a business discussion. Sec.
274(e)(1). Factors entering into this determination include the
surroundings in which the food and beverages are furnished, the
trade, business, or income-producing activity of the taxpayer,
and the relationship to such trade, business, or activity of the
person furnished with the food or beverages. Sec. 274(e).
Mrs. Kerrigan did not record the business purpose of these
almost daily meals or the business relationship of the persons
whom she entertained. Nor have petitioners introduced testimony
of any of Mrs. Kerrigan's business clients. See sec. 1.274-
5(c)(3), Income Tax Regs. Under these circumstances, petitioners
have not met the substantiation requirements. See, e.g., Sam
Goldberger, Inc. v. Commissioner, 88 T.C. 1532, 1558 (1987);
Walliser v. Commissioner, 72 T.C. 433, 442 (1979).
In addition, Mrs. Kerrigan claimed a business deduction for
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Last modified: May 25, 2011