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that petitioner was required to report on his individual Federal
income tax returns for the years in issue.3
OPINION
In general, section 162 provides for the deductibility of
all ordinary and necessary expenses paid or incurred during the
taxable year in carrying on a trade or business. However,
section 274 prohibits deductions otherwise allowable for expenses
paid with respect to a facility used in connection with an
activity generally considered to constitute entertainment,
amusement, or recreation. Sec. 274(a)(1)(B); sec. 1.274-
2(a)(2)(i), Income Tax Regs. The provision of section 274
applicable to entertainment facilities (section 274(a)(1)(B)) was
specifically amended by section 361(a) of the Revenue Act of
1978, Pub. L. 95-600, 92 Stat 2847, to provide a flat prohibition
on deductions for such facilities--that is, deductions for
entertainment facilities are prohibited without regard to whether
the taxpayer can establish that the expenditure was directly
related to or associated with the active conduct of his trade or
business.
The test of whether an activity is an activity which “is of
a type generally considered to constitute entertainment,
amusement, or recreation” for purposes of the statute is an
3 By operation of a statutory formula, the increase in the
amount of petitioner's income also caused a decrease in the
amount of allowable itemized deductions for 1991 and 1992.
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