Allison is part owner of a law firm, Canyon Law Offices, LLP. Her firm services sports teams and high-wealth individuals, including professional athletes. As part of her job, she entertains clients and travels to their location, where she spends money on meals and entertainment. During her travels she incurs expenses for meals, hotel, airfare, transportation, and other miscellaneous items associated with travel. Additionally, she pays for a luxury box for the local professional basketball team and has season tickets to the local professional football team. Allison tells you, her CPA, that she spent $45,000 on meals and entertainment (including the luxury box and season tickets) during the prior year. She did not keep detailed receipts for each meeting or event, but can recall whom she was with, the topics discussed, and the location of each meeting.

Prepare a tax memo for Allison regarding deductibility of meals and entertainment expenses. Include a discussion of the AICPA Statements on Standards for Tax Services with regard to your responsibilities as a tax professional and a summary of the tax law under Section 274. Include any other relevant authoritative sources, such as tax law, to help your client understand the deductibility of meals and entertainment expenses