Churchill Downs, Inc. and Subsidiaries - Page 1

                                   115 T.C. No. 20                                    

                               UNITED STATES TAX COURT                                

               CHURCHILL DOWNS, INC. AND SUBSIDIARIES, Petitioners v.                 
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 8140-99.                Filed September 26, 2000.           
               P conducts horse races, including the Kentucky                         
               Derby, at its facilities.  The races produce revenues                  
               through pari-mutuel wagering (including simulcast pari-                
               mutuel wagering), admissions and seating, concession                   
               commissions, sponsorship revenues, licensing rights,                   
               and broadcast fees.  P’s largest source of revenues is                 
               wagers placed on horse races.  P incurred entertainment                
               expenses that were ordinary and necessary expenses                     
               under sec. 162, I.R.C.  The expenses at issue included                 
               P’s cost of holding the Sport of Kings Gala, a brunch                  
               following the post position drawing for the Derby race,                
               a week-long, hospitality tent for the press, Kentucky                  
               Derby Winner’s Party, Breeders’ Cup press-reception                    
               cocktail party and dinner, and the Breeders’ Cup press                 
                    P deducted the full amount of expenses incurred in                
               holding the above events.  R determined the expenses                   
               were only partially deductible pursuant to sec. 274(n),                

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