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for the section 274(e)(8) exception to the 50-percent limitation
rule of section 274(n) because the expenses were not part of
producing the taxpayer’s entertainment product and the taxpayer
provided the parties free of charge to its guests.
The Court agrees with petitioner that the $889.52 expense at
issue is excluded from section 274(n)(1) by virtue of section
274(e)(8). The guests entertained by petitioner were
representatives of two corporations that had contracts with
petitioner in a bona fide transaction for adequate and full
consideration for the subsequent business uses of these
corporations.
Petitioner incurred the expenses in question as part of his
business. Respondent agrees that the claimed expenses were
substantiated. Thus, the Court holds that the food and beverages
were sold in a bona fide transaction for adequate and full
consideration in money or money’s worth. Sec. 274(e)(8); see
also secs. 1.274-2(f)(2)(ix), 1.274-2(e)(3)(iii), Income Tax
Regs. Accordingly the Court holds that the $889.52 expense is
not subject to the 50-percent limitation of section 274(n) and is
fully deductible.
At trial, petitioner claimed other expenses in connection
with the Frexie activity. He presented a number of receipts for
ticket purchases, FedEx deliveries, and miscellaneous items such
as programs, scorecards, a baseball cap, and a T-shirt. There
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