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Section 274(e) provides that expenses for food and beverages
furnished on the business premises of a taxpayer primarily for
his employees may be deductible and are not subject to the strict
substantiation requirements of section 274(d). See sec. 1.274-
5T(c)(7), Temporary Income Tax Regs., supra. However, this
section does not apply to petitioner’s expenditures because the
employees at the store that petitioner manages are The Men’s
Warehouse’s employees, not petitioner’s employees. This section
is aimed at expenses that are deductible by an employer because
they are in the nature of compensation paid to his employees,
which is not true of the expenses in this case. See Haman v.
Commissioner, T.C. Memo. 1972-118, affd. 500 F.2d 401 (9th Cir.
1974). Therefore, we find that petitioner has failed to carry
his burden, and we will not allow him a deduction for any
entertainment or meal expenses.
4. Cable Television and Home Telephone
Section 262 provides that personal, living, and family
expenses are not deductible unless expressly allowed, and the
regulations specify that personal, living, and family expenses
include utilities provided to a taxpayer’s home unless the
taxpayer uses a part of his home for his business. Sec. 1.262-
1(b)(3), Income Tax Regs. Section 262(b) specifically disallows
any deduction for the first line of basic local telephone service
provided to a taxpayer’s residence.
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Last modified: November 10, 2007