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entertained.8 Sec. 274(a), (d); sec. 1.274-2(a), Income Tax
Regs.
Petitioners introduced various restaurant and coffee shop
receipts to substantiate the entertainment expenses. Mr. Soholt
added notations on the receipts after the year at issue and
before trial. Some of these notations include the name of a
person or a vague description such as “Answering Questions.”
We find Mr. Soholt’s testimony on this issue to be
thoughtful and credible. Unfortunately, the evidence petitioners
submitted to substantiate their hospitality expenses does not
meet the requirements of section 274. Petitioners do not have
records indicating the business purposes of the expenses, Mr.
Soholt’s business relationship to the persons entertained or any
other information that would comply with the strict
substantiation requirements. The notations on the receipts, made
after the year at issue, are simply too vague to meet the
required standard. Petitioners are therefore not entitled to
deduct any hospitality expenses.
8For expenses incurred directly before or after a
substantial and bona fide business discussion, the taxpayer must
show the expense was associated with, rather than directly
related to, the active conduct of the trade or business. Sec.
274(a), (d); sec. 1.274-2(a), Income Tax Regs.
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Last modified: November 10, 2007