Joan Bronson operated a grocery store in San Francisco. Although she had been in business at the same location for many years and had a large regular group of customers, she became worried when the chain supermarkets started using cash prize contests. She decided that she would not try to compete in this way, but instead she sent a letter to each of her regular customers, inviting them to a cocktail party. During that year she had two cocktail parties, one in the store itself, and one at her home, in each case with regular customers. The total cost was $1,000. During that same year Bronsons gross receipts declined about 10 percent. She had not previously spent any money on advertising or on entertainment.

Is the $1,000 deductible?

(see Reg. 1.162-20(a)(2) and Sanitary Farms Dairy, Inc v. Commissioner,., 25 T.C. 463 (1955), Acq. 1956-2 C.B. 8 holding that the cost of a big game hunt in Africa was deductible as an ordinary and necessary expense of a dairy business in Erie, Pennsylvania because the dairy had in large measure become a museum containing stuffed wild animals and the trip had great publicity value. And see Sullivan v. Commissioner, 43 T.C.M. 880 (1982) in which a gas station owner was allowed a $162 deduction for beer served to customers to boost sales.)