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allowable for expenses paid with respect to a “facility” are not
allowed when the facility is used in connection with an activity
which is of a type generally considered to constitute
entertainment, amusement, or recreation. Catalano v.
Commissioner, 240 F.3d 842, 845 (9th Cir. 2001), affg. T.C. Memo.
1998-447; Gordon v. Commissioner, T.C. Memo. 1992-449; Stan
Frisbie, Inc. v. Commissioner, T.C. Memo. 1990-419. In this
context, the term “facility” “‘includes any item of real or
personal property which is owned, rented, or used by a taxpayer
in conjunction or connection with an entertainment activity’”.
Ireland v. Commissioner, 89 T.C. 978, 981 (1987) (quoting H.
Conf. Rept. 95-1800, at 249 (1978), 1978-3 C.B. (Vol. 1) 521,
583); see also sec. 1.274-2(e)(2)(i), Income Tax Regs. The
Centurion is a yacht which, in turn, is a “facility” within the
7(...continued)
SEC. 274(a). Entertainment, Amusement, or Recreation.--
(1) In general.--No deduction otherwise allowable
under this chapter shall be allowed for any item–-
(A) Activity.--With respect to an
activity which is of a type generally
considered to constitute entertainment,
amusement, or recreation, unless the taxpayer
establishes that the item was directly
related to * * * the active conduct of the
taxpayer’s trade or business, or
(B) Facility.--With respect to a
facility used in connection with an activity
referred to in subparagraph (A).
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