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
breakfast.
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),
I.R.C.
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