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Gulfstream). During 1996, the Gulfstream was used partly in
pursuit of NBA’s trade or business for transportation purposes
and partly for personal entertainment use by certain employees
(the employees) of NBA.4 The net expenditures, including
depreciation, incurred by Aviation during the taxable year 1996
in connection with the operation and ownership of the Gulfstream
totaled $2,548,990. On the basis of an allocation according to
flight miles, $1,814,894, or approximately 71.2 percent, of the
net expenditures was attributed to business use. The remaining
portion, $734,096, or approximately 28.8 percent, was attributed
to personal entertainment use. Petitioner deducted the entire
$2,548,990 related to the operation and ownership of the
Gulfstream on its 1996 Federal income tax return.
The personal entertainment use of the Gulfstream was treated
as fringe benefit compensation to the recipient employees. On
the basis of the valuation rules set forth in section 1.61-21(g),
Income Tax Regs., NBA determinated that the value of the fringe
benefits received by the employees on account of the personal
entertainment use of the Gulfstream totaled $131,575 for the
taxable year 1996. The amount of the fringe benefits
attributable to each employee was included on the employees’
respective Forms W-2, Wage and Tax Statement. The $2,548,990
4The personal entertainment use consisted of hunting,
fishing, vacation, and other similar trips for certain employees
of NBA.
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