In the sophisticated commercial world of today there are many expenses that might be termed of a "mixed complexion," having elements of both a business and non-business character. Nowhere is this better exemplified than in the area of entertainment expenses. Though one may assume that it should be the policy of the courts to allow full and fair deduction of business expenses in general, many difficulties arise regarding expenditures for entertainment purposes. In virtually all entertainment there is personal enjoyment of a social nature by the taxpayer as well as potential business value. Furthermore, what business value there is will often be of an intangible nature; it is difficult for a businessman to point to a specific transaction and say this is the result of taking John Doe out to dinner. In addition, most of the evidence of the purpose of the expenditure will of necessity come from the taxpayer, who is probably inclined to overemphasize the business need for the expenditure. Thus, even if the courts would not generally follow a doctrine that deductions are a matter of legislative grace, the question of are legitimate entertainment expenses must nevertheless be narrowly construed because of these peculiar factors.
David W. Belin S.Ed.,
TAXATION-FEDERAL INCOME TAX-LIMITED DEDUCTIBILITY OF ENTERTAINMENT EXPENSES,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol52/iss7/6