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Mr. Beck justified payment by Beck's Liquors of expenses for
traveling to Las Vegas by the savings in the exchange rate. The
Fargo banks charged 17 percent whereas the casinos charged 10
percent. If he exchanged $10,000 in Fargo, the banks charged
$1,700. If he exchanged the same amount in Las Vegas, the
casinos charged only $1,000. Therefore, every time he went to
Las Vegas, he saved $700 to $1,050 on the exchange, which amounts
exceeded his travel expenses.
Although Mr. Beck was able to get a better exchange rate for
the Canadian currency, we are convinced that the trips to Las
Vegas were primarily to allow Mr. Beck to gamble. The expenses
are personal and not deductible.
b. Other Meal and Entertainment Expenses
Beck's Liquors claimed the cost of meals as entertainment
deductions for 1991, 1992, and 1993, most of which respondent
disallowed. Respondent disallowed all deductions for meal
expenses.
Entertainment expenses are not deductible from gross income
unless, as a threshold matter, they are ordinary and necessary
expenditures directly connected with or pertaining to the
taxpayer's trade or business. Sec. 1.162-1(a), Income Tax Regs.
The expenses must be "directly related" to the business. Sec.
274(a); sec. 1.274-2(c)(3), Income Tax Regs. For an
entertainment expense to be directly related to the active
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