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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".
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