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deductible and testified that other items were misclassified but,
nevertheless, were deductible business expenses.
(f) For 1989, petitioner presented documentation of the
following expenditures that were listed on Exhibit 40-R in the
following categories:
Category Line Nos. Amount
Client gifts 148-162 $465.13
Employee & client
gifts & entertainment 950-1076 3,365.06
Client gifts 1469-1481 178.62
Client entertainment 1485-1529 747.61
American Express 11796-1835 1,118.95
1Some of these items, which do not appear to be meal or
entertainment expenses, have been conceded by respondent. The
amount shown has been reduced by the conceded amounts.
(g) For 1990, petitioner presented documentation of the
following expenditures that were listed on Exhibit 41-R in the
following categories:
Category Line Nos. Amount
Business promotion 151-166 $1,252.94
Client gifts 193-206 534.09
Employee gifts 877-883 543.37
Client entertainment 887-964 1,909.23
Business promotion 1303-1306 429.31
Client entertainment 1439-1478 1,074.75
Client gifts 1579-1593 484.17
After reviewing petitioner’s documentation and testimony, we
have no doubt that a properly conducted audit of petitioner’s
meals and entertainment and business promotion records could have
resulted in a reasonable dispute regarding whether the
requirements of section 162 have been satisfied with respect to
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