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contrast, the events that give rise to the Derby, Breeders’ Cup,
and miscellaneous expenses are invitation-only events that are
attended by selected horsemen, petitioners’ employees, media
officials, and local dignitaries. They may be entertainment
events designed to make the Derby and Breeders’ Cup more
prestigious events and to heighten public awareness of the
upcoming events as petitioners claim. However, we can see no
meaningful difference between the expenses at issue here and
normal entertainment of selected clients and suppliers, which is
limited by section 274(n). The expenses at issue are not
expenses for goods, services, and facilities made available by
petitioners to the general public. The events at issue provide
goods and services to persons petitioner selects to entertain.4
4 Sec. 1.274-2(f)(2)(viii), Income Tax Regs., provides
useful guidance on the difference between providing goods and
services to the general public and providing them to a selected
clientele. Those regulations provide:
(viii) Items available to the public. Any
expenditure by a taxpayer for entertainment (or for a
facility in connection therewith) to the extent the
entertainment is made available to the general public
is not subject to the limitations on allowability of
deductions provided for in paragraphs (a) through (e)
of this section. Expenditures for entertainment of the
general public by means of television, radio,
newspapers and the like, will come within this
exception, as will expenditures for distributing
samples to the general public. Similarly, expenditures
for maintaining private parks, golf courses and similar
facilities, to the extent that they are available for
public use, will come within this exception. For
example, if a corporation maintains a swimming pool
(continued...)
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Last modified: May 25, 2011