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matching inclusion in the income of the recipient and generally
to prevent the deduction of personal expenditures under the guise
of business expenses.” World Wide Agency, Inc. v. Commissioner,
T.C. Memo. 1981-419; see also H. Rept. 1447, 87th Cong., 2d Sess.
(1962), 1962-3 C.B. 405, 423. Since section 102(c)(1) precludes
treatment of gifts to employees as tax-free gratuities, the
principle of matching income inclusion and deduction will be
protected in situations such as that now before the Court.
We therefore hold that the gift nut baskets presented to
employees of R&J are not gifts within the meaning of section
274(b) and that deduction of amounts expended to purchase the
baskets is not subject to the $25 limitation. Hence, a deduction
of $61 is allowed for each basket given to those stipulated as
employees.
3. Christmas Bonuses
With respect to the $100 bills given to employees as
Christmas bonuses, petitioners rely primarily on the argument
that the full $4,200 is deductible under section 162(a)(1)
because it represents compensation paid to those employees.
Alternatively, if the bonuses are characterized as gifts,
petitioners aver that they are fully deductible for the same
reasons as were discussed above in connection with the nut
baskets.
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