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respondent extrapolates that any such distribution of food is a
gift within the meaning of section 274 and is thereby subject to
the $25 limitation.
We, however, disagree with respondent’s premise. While the
cited regulation may specify the proper characterization for an
item which falls within the section 274 criteria for both a gift
and an entertainment expense, it does not establish that the item
qualifies as either in the first instance. For that, we must
look to the statutory definition. Section 274(b)(1) states
expressly that “For purposes of this section, the term ‘gift’
means any item excludable from gross income of the recipient
under section 102”. Section 102, in turn, is equally explicit in
providing that such section “shall not exclude from gross income
any amount transferred by or for an employer to, or for the
benefit of, an employee.” Sec. 102(c)(1). The plain language of
the sections thus appears to demand the construction advocated by
petitioners. Additionally, we note that because this subsection
(c) was enacted as part of the Tax Reform Act of 1986, Pub. L.
99-514, sec. 122(b), 100 Stat. 2110, certain earlier cases may be
inapposite.
We further observe that petitioners’ interpretation would
seem to do no violence to the purpose underlying the strict
substantiation rules. The aim of these restrictions is “to
disallow as business deductions items for which there will be no
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