- 12 - E. Meals and Entertainment Petitioners claim a deduction under section 162(a) for meals and entertainment in the amount of $8,719 ($17,438 before taking into account the 50-percent reduction in the deductibility of such expenses provided for by section 274(n)(1)).3 The substantiation requirements of section 274(d) apply to entertainment activities. Section 274(a)(1)(A) places additional restrictions on the deduction of expenses with respect to entertainment activities. Section 1.274-5T, Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985), contains the substantiation requirements for deductible, business-related entertainment, including meals with customers or clients.4 The applicable requirements, contained in paragraph (b) of section 1.274-5T, Temporary Income Tax Regs. (substantiation of amount, time, place, business purpose, and business relationship), are satisfied by the Exhibit B1 and B2 formats. Petitioners’ substantiation schedule separately lists (1) expenditures totaling $13,051.56, for restaurant meals with clients, potential clients, and persons referring potential clients (restaurant meal expenses), and (2) expenditures totaling 3 The allegedly deductible expenditures are contained in Exhibits B1 and B2 accompanying petitioners’ reply brief. 4 Mistakenly, petitioners cite sec. 1.274-2(f)(2)(i), Income Tax Regs., which provides a quiet-business-meals exception but which applies to “[b]usiness meals and similar expenditures paid or incurred before January 1, 1987".Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011