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item was directly related to the active
conduct of such trade or business.
(3) Denial of deduction for club dues.--
Notwithstanding the preceding provisions of this
subsection, no deduction shall be allowed under
this chapter for amounts paid or incurred for
membership in any club organized for business,
pleasure, recreation, or other social purpose.
Regulations further define entertainment as “any activity
which is of a type generally considered to constitute
entertainment, amusement, or recreation, such as entertaining at
night clubs, cocktail lounges, theaters, country clubs, golf and
athletic clubs, sporting events, and on hunting, fishing,
vacation and similar trips”, sec. 1.274-2(b)(1)(i), Income Tax
Regs., and explain:
An objective test shall be used to determine whether an
activity is of a type generally considered to
constitute entertainment. Thus, if an activity is
generally considered to be entertainment, it will
constitute entertainment for purposes of this section
and section 274(a) regardless of whether the
expenditure can also be described otherwise, and even
though the expenditure relates to the taxpayer alone.
This objective test precludes arguments such as that
“entertainment” means only entertainment of others or
that an expenditure for entertainment should be
characterized as an expenditure for advertising or
public relations. * * * [Sec. 1.274-2(b)(1)(ii), Income
Tax Regs.]
Turning to the situation before us, the Court is satisfied
that the Arizona Club, Gardiner’s Resort, and Gainey Ranch Golf
Club are clubs within the meaning of the above-quoted statute and
regulations. Section 274(a)(3) operates as a complete and
outright ban on any deduction for club membership dues. Pursuant
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