Sherman J. Miller and Alice K. Miller - Page 14

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            the taxable year was more for business use than for personal use,                         
            and the taxpayer is required to maintain records segregating the                          
            use of the facility into business and personal categories.  Sec.                          
            1.274-5T(c)(6)(iii), Temporary Income Tax Regs., 50 Fed. Reg.                             
            46022 (Nov. 6, 1985).  The requirements of section 274 are in                             
            addition to those of section 162, and petitioner must satisfy, as                         
            an initial matter, the "ordinary and necessary" business expense                          
            requirement of section 162.  Randall v. Commissioner, 56 T.C.                             
            869, 874-875 (1971).                                                                      
                  Petitioner offered into evidence the receipts from the                              
            country club for the year 1987, which he determined were for                              
            business expenditures at the time he prepared his return.  There                          
            was no evidence, however, that petitioner ever had any direct                             
            business meetings at the country club.  There was only evidence                           
            of his prospecting activities, which did not rise to the level of                         
            a direct business meeting as required.  Petitioner has failed to                          
            show that the activities at the country club, which afforded                              
            contacts with possible future clients, had any direct                                     
            relationship to the production of business income.  See Henry v.                          
            Commissioner, supra.                                                                      
                  Petitioner contends that the receipts from the country club                         
            for 1987 illustrate that during more than 50 percent of the days                          
            that he used the country club, the use was for business purposes.                         
            He claims that for this reason he is entitled to a deduction                              
            under the "deemed to have established" rule of section 1.274-                             

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