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274(n) was inapplicable because the expenditure was not incurred
for entertainment. Petitioner claims that the $889.52 was
expended as performance on a contract with Nabisco and Chicago
Title in that he was required to pay for catering services
regardless of whether business was discussed in the luxury suite.
Thus, the Court construes petitioner’s argument to be that the
50-percent limitation for food and beverages found in section
274(n) does not apply to the expense at issue because the $889.52
represented goods and services sold by petitioner in a bona fide
consideration for an adequate and full consideration in money or
money’s worth. Sec. 274(e)(8). Accordingly, petitioner argues
he was not entertaining guests.
Under section 274(n)(1)(A), any amount allowable as a
deduction for “any expense for food or beverages” in connection
with a trade or business activity is generally limited to 50
percent of the amount of the expense that would otherwise be
allowable. However, section 274(e)(8) provides an exception to
the 50-percent limitation of section 274(n)(1) for “Expenses for
goods or services * * * which are sold by the taxpayer in a bona
fide transaction for an adequate and full consideration in money
or money’s worth.” Sec. 274(n)(2).
Section 1.274-2(f)(2)(ix), Income Tax Regs., provides:
Any expenditure by a taxpayer for entertainment (or for
use of a facility in connection therewith) to the
extent the entertainment is sold to customers in a bona
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