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provision of” chapter 1 of the Internal Revenue Code. Sec.
274(b)(1); sec. 1.274-3(b)(1), Income Tax Regs. A gift in this
statutory sense, in turn, “proceeds from a ‘detached and
disinterested generosity’”. Commissioner v. Duberstein, 363 U.S.
278, 285 (1960) (quoting Commissioner v. LoBue, 351 U.S. 243, 246
(1956)); see also Dobbe v. Commissioner, supra. Such business
gifts not in excess of $25 are deductible to the extent that the
strict substantiation rules of section 274(d) are satisfied.
In contrast, expenditures for transfers made in recognition
of past services or as an incentive for future performance have
been permitted as deductions under section 162 on grounds that
they involve compensation includable in the gross income of the
recipient. See, e.g., Dobbe v. Commissioner, supra; McCue v.
Commissioner, supra; St. John v. Commissioner, supra. Prizes and
awards to sales personnel have been placed in this category.
See, e.g., Dobbe v. Commissioner, supra; Jordan v. Commissioner,
supra; McCue v. Commissioner, supra.
Concerning the cash, Mr. Hartmann and Mr. Deihl testified
with regard to petitioners’ practices in giving away cash at
distributor conventions. They refer to a convention event known
as “Make Joe pay” time, when Mr. Deihl would hand out “cash
prizes” or “awards” ranging from approximately $500 up to $2,500.
Mr. Deihl also mentioned gimmicks such as taping $20 bills under
chair seats for random recipients.
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