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During the 1991 and 1992 taxable years petitioner paid
$10,000 for the lease of the ranch. Petitioner deducted, as
entertainment expenses, the $10,000 lease payment for each year
at issue. In the notice of deficiency, respondent determined
that the lease payments were not deductible, pursuant to section
274(a)(1)(B), because they were made with respect to a facility.
OPINION
Section 162(a) allows a deduction for all ordinary and
necessary expense incurred in carrying on a trade or business.
There is no dispute that petitioner's expenditure for the hunting
lease satisfies the requirements of section 162(a). That,
however, does not end the matter. Section 274(a)(1)(A) provides
that no deduction is allowable with respect to an activity of a
type generally considered to constitute entertainment "unless the
taxpayer establishes that the item was directly related to, or,
in the case of an item directly preceding or following a
substantial and bona fide business discussion * * *, that such
item was associated with, the active conduct of the taxpayer's
trade or business". Section 274(a)(1)(B) is more draconian and
prohibits any deduction for any item "With respect to a facility
used in connection with an activity" which is of a type generally
considered to constitute entertainment, amusement, or recreation.
Thus, where (1) there is a facility, (2) the facility is used in
connection with an activity that constitutes entertainment, and
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