Section 274 disallows in whole, or in part, certain expenditures for entertainment, gifts and travel which would otherwise be allowable under Chapter 1 of the Code. The requirements imposed by section 274 are in addition to the requirements for deductibility imposed by other provisions of the Code. If a deduction is claimed for an expenditure for entertainment, gifts, or travel, the taxpayer must first establish that it is otherwise allowable as a deduction under Chapter 1 of the Code before the provisions of section 274 become applicable. An expenditure for entertainment, to the extent it is lavish or extravagant, shall not be allowable as a deduction. The taxpayer should then substantiate such an expenditure in accordance with the rules under section 274(d). See § 1.274-5. Section 274 is a disallowance provision exclusively, and does not make deductible any expense which is disallowed under any other provision of the Code. Similarly, section 274 does not affect the includability of an item in, or the excludability of an item from, the gross income of any taxpayer. For specific provisions with respect to the deductibility of expenditures: for an activity of a type generally considered to constitute entertainment, amusement, or recreation, and for a facility used in connection with such an activity, as well as certain travel expenses of a spouse, etc., see § 1.274-2; for expenses for gifts, see § 1.274-3; for expenses for foreign travel, see § 1.274-4; for expenditures deductible without regard to business activity, see § 1.274-6; and for treatment of personal portion of entertainment facility, see § 1.274-7.
[T.D. 6659, 28 FR 6499, June 25, 1963, as amended by T.D. 8666, 61 FR 27006, May 30, 1996]
Notes of Decisions
Mazzocchi Bus Co. v. Comm'r, 65 T.C.M. 1858 (Tax Ct. 1993).
· cites it 2× “, establishes the following substantiation requirements a taxpayer must meet in order to deduct these expenses: Section 274(d) and this section contemplate that no deduction shall be allowed for any expenditure for travel, entertainment, or a gift unless the taxpayer…”
Feldman v. Comm'r, 86 T.C. 458 (Tax Ct. 1986).
· cites it 2× “*157 Because of our conclusion that petitioners' expenses for the reception are not deductible under section 162 , we need not consider whether the more stringent section 274 requirements are met.”
Wott v. Comm'r, 51 T.C.M. 1577 (Tax Ct. 1986).
· cites it 2× “*317 Section 274(a)(1)(B) 10 provides in part that no deduction otherwise allowable shall be allowed with respect to an entertainment facility unless: (1) The facility was used primarily for the furtherance of taxpayer's trade or business; and (2) the expenditure was directly…”
Nor-Cal Adjusters v. Comm'r, 30 T.C.M. 837 (Tax Ct. 1971).
· cites it 2× “First, it must establish *157 that the expenditures were ordinary and necessary business expenses within the meaning of section 162 .”
Catalano v. Comm'r, 1998 T.C. Memo. 447 (Tax Ct. 1998).
· cites it 2× “The separate existence of petitioner's S corporation means that petitioner as an individual generally can enter a transaction with the corporation as if he were unrelated to it, which petitioner has chosen to do in the case of the boat leasing transactions, but as a consequence…”
Barr v. Comm'r, 56 T.C.M. 1255 (Tax Ct. 1989).
· cites it 2× “274-2(a), Income Tax Regs. The only evidence that petitioner introduced on this issue was a list of his expenses, purportedly an abstract of the entries that he had made in a diary, which was accepted in lieu of his oral testimony.”
Jones v. Comm'r, 56 T.C.M. 603 (Tax Ct. 1988).
· cites it 2× “, establishes the following *555 substantiation requirements a taxpayer must meet in order to deduct these types of expenses: Section 274(d) and this section contemplate that no deduction shall be allowed for any expenditure for travel, entertainment, or a gift unless the…”
Shields v. Comm'r, 54 T.C.M. 711 (Tax Ct. 1987).
· cites it 2× “The requirements of section 274(d) are in addition to, and stand independently of, any other requirements for deductibility imposed by the Code. Sec. 1.274-1, Income Tax Regs.”
Fellrath v. Comm'r, 42 T.C.M. 939 (Tax Ct. 1981).
· cites it 2× “Thus, under the general rule of section 274(a)(1) 11 expenditures for entertainment, amusement, and recreation are not deductible unless they are directly related to or associated with the active conduct of the taxpayer's trade or business.”
Berkley Mach. Works & Foundry Co. v. Comm'r, 36 T.C.M. 733 (Tax Ct. 1977).
· cites it 2× “As a comparison of the totals from Table 2 and Table 5 reveals, particularly in light of the Table 5 expenses which must be disallowed on other grounds, the expenses now challenged on the basis of section 162 make up a rather small portion of the total expenditures in issue.”
Snyder v. Comm'r, 55 T.C.M. 1334 (Tax Ct. 1988).
· cites it 2× “Section 274 operates to disallow deduction of certain expenditures for entertainment, gifts and travel if not properly substantiated, even though the expense is permissible under another provision of the Code.”
Detko v. Comm'r, 53 T.C.M. 186 (Tax Ct. 1987).
· cites it 4× “274-2(e)(3)(i) , 1.48-1(b)(2) , Income Tax Regs.”
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