Patrick E. Catalano - Page 6

                                        - 6 -                                         

          objective one.  Sec. 1.274-2(b)(1)(ii), Income Tax Regs.  That              
          regulation provides:                                                        
               An objective test shall be used to determine whether an                
               activity is of a type generally considered to                          
               constitute entertainment.  Thus, if an activity is                     
               generally considered to be entertainment, it will                      
               constitute entertainment for purposes of * * * section                 
               274(a) regardless of whether the expenditure can also                  
               be described otherwise * * *.  This objective test                     
               precludes arguments such as * * * that an expenditure                  
               for entertainment should be characterized as an                        
               expenditure for advertising or public relations. * * *                 
               There can be no dispute that, objectively, petitioner’s                
          boats, a cabin cruiser and two other “pleasure boats”, as he                
          termed them, constitute entertainment facilities.  See Rutz v.              
          Commissioner, 66 T.C. 879 (1976); Nicholls, North, Buse Co. v.              
          Commissioner, 56 T.C. 1225 (1971); see also Gordon v.                       
          Commissioner, T.C. Memo. 1992-449; Nguyen v. Commissioner, T.C.             
          Memo. 1989-101.  Under an objective test, boats such as                     
          petitioner’s are generally considered to be associated with                 
          recreation.  Petitioner's own testimony establishes that he used            
          the boats at least in some part for providing entertainment to              
          clients and potential clients.  Petitioner has conceded that he             
          invited clients and potential clients aboard his boats, sometimes           
          accompanied by their spouses.  On board, although some business             
          discussions may have taken place, petitioner also watched                   
          television with his guests and used the stereo.  There were three           
          sets of binoculars for his guests' use, and occasionally                    
          petitioner served them food and beverages.  Petitioner took his             

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  Next

Last modified: May 25, 2011