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1. Meal Expenses, Sales Promotions
Petitioners provided receipts or canceled checks for
approximately $1,523 paid to various restaurants and food stores.
In addition, they provided receipts and canceled checks in the
approximate amount of $965 for "sales promotion". Included in
the alleged expenses are amounts expended for what Mr. Stone
described as "public relations" and "to get my name out." Other
alleged expenses were for Mr. Stone "just to grab a bite to eat",
the children's birthdays, Christmas presents for nephews, and
gifts and entertainment of friends who also were clients. Mr.
Stone was unable to identify the type of business that was
discussed at the time the entertainment or meal expenses were
incurred or the business reason for the gifts.
With regard to the expenditures that involved the children,
petitioners argue that their children help in the business by
answering the telephone and in general, but unspecified, ways.
We bear in mind that the children were quite young (ages 4
through 12), and regardless of the contributions they might have
made, these expenditures would have been incurred for personal
reasons. These are clearly personal expenses. With regard to
the entertainment of and gifts to friends, petitioners argue
that, if they derive any income from their friends for services
rendered, they are entitled to claim business expense deductions.
While friendship with the recipient is not necessarily fatal to
the deductibility of an expense, petitioners must show that the
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Last modified: May 25, 2011