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accident, Menards likely would not have incorporated TMI and
would have continued to sponsor race cars directly.
2. Whether the TMI Expenses Were Ordinary and
Necessary in the Furtherance of Menards’s Business
To meet the second part of the Lohrke test, the taxpayer
must demonstrate that the expenses were ordinary and necessary in
the furtherance or promotion of the taxpayer’s business. With
respect to race car sponsorship expenditures, we have held that,
to the extent the expenditures are reasonable in amount, the
taxpayer may deduct them as ordinary and necessary business
expenses attributable to advertising. See, e.g., Ciaravella v.
Commissioner, T.C. Memo. 1998-31; Gill v. Commissioner, T.C.
Memo. 1994-92, affd. without published opinion 76 F.3d 378 (6th
Cir. 1996); Boomershine v. Commissioner, T.C. Memo. 1987-384;
Brallier v. Commissioner, T.C. Memo. 1986-42; Hestnes v.
Commissioner, T.C. Memo. 1983-727, affd. without published
opinion 762 F.2d 1015 (7th Cir. 1985); Lang Chevrolet Co. v.
Commissioner, T.C. Memo. 1967-212. First, however, a taxpayer
must show that the purpose for sponsoring the racing activity was
“to gain a reasonable amount of publicity” for the taxpayer’s
business. Lang Chevrolet Co. v. Commissioner, supra. One
objective indication of the taxpayer’s intent behind the racing
expenditures is “the reasonableness of the relationship between
the amount expended for the activity compared to the amount of
benefit reasonably calculated to be derived.” Id. We now
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