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presentations. Concerning the deductibility of such items, the
parties focused their discussion and arguments at trial and on
brief on the following categories: Cash, items purchased at
Neiman Marcus, items purchased at Landmark Jewelers Ltd. (other
than Rolex watches), Rolex watches, items purchased at Saba’s
Western Wear,9 and Boss Day Planners.
As relevant here, the proper standard for determining the
deductibility of the various items given away by petitioners’
corporations depends upon which of two broad characterizations is
applicable to each item. See, e.g., Dobbe v. Commissioner, T.C.
Memo. 2000-330, affd. 61 Fed. Appx. 348 (9th Cir. 2003); Jordan
v. Commissioner, T.C. Memo. 1991-50; McCue v. Commissioner, T.C.
Memo. 1983-580; St. John v. Commissioner, T.C. Memo. 1970-238.
Deductions for business gifts within the meaning of section
274 are flatly disallowed to the extent that the expense for
gifts to a particular individual exceeds $25 for the taxable
year. Sec. 274(b)(1); sec. 1.274-3(a), Income Tax Regs. The
term “gift” for purposes of this section is defined as “any item
excludable from gross income of the recipient under section 102
which is not excludable from his gross income under any other
9 Due to the abbreviations and other simplification used in
many of the documents in the record, the precise name of various
of the establishments at which claimed expenditures were incurred
is unclear. The Court therefore has sought merely to enable a
reasonable identification of the vendors based on available
information in the record.
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