Patrick E. Catalano - Page 7

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          clients or other business contacts for rides on San Francisco               
          Bay.  He taught one client, a Mr. Labruzzo, how to operate one of           
          the boats.                                                                  
               We conclude that, because the boats meet the objective                 
          criteria for entertainment facilities under section 274(a),                 
          amounts expended to lease the boats do not qualify as business              
          expense deductions.                                                         
               Petitioner has testified that the boats were used for                  
          substantial business purposes in that he conducted meetings with            
          clients or potential clients.  He maintains that the boats were,            
          in effect, second offices, the location of which was more                   
          convenient for some clients.  Such testimony is unavailing.  The            
          1978 amendment of section 274(a)(1)(B), which is applicable here,           
          “indicates that any use of the facility, no matter how small, in            
          connection with entertainment is fatal to the claimed deduction.”           
          Ireland v. Commissioner, 89 T.C. 978, 983 (1987); see Gordon v.             
          Commissioner, supra.  The legislative history accompanying the              
          1978 amendment to section 274 recognized “that some legitimate              
          business expenses may be incurred with respect to entertainment             
          facilities”.  S. Rept. 95-1263 (1978), 1978-3 C.B. (Vol. 1) 321,            
          472.  Congress nevertheless disallowed the deduction of such                
          expenses in view of the significant opportunities for abuse that            
          had existed when such deductions were permitted for entertainment           
          facilities.  Id.  Moreover, although there are some exceptions to           

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