Court Opinion

ID: 4598621
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:21:40.205994+00
Date Added: 2024-06-11T07:59:17.261255
License: Public Domain

Herbert Davis and Georgia Davis, Petitioners, v. Commissioner of Internal Revenue, RespondentDavis v. CommissionerDocket No. 515091United States Tax Court26 T.C. 49; 1956 U.S. Tax Ct. LEXIS 221; April 10, 1956, Filed *221 Decision will be entered under Rule 50.  1. Petitioner, one of three licensed retail liquor dealers in Clinton, Tennessee, all of whom were restricted to operating within a 3-block area located approximately in the center of the Clinton business district, operated his liquor store during 1948, 1949, and 1950, on premises leased from his father at a rental of 5 per cent of gross sales with a minimum guarantee of $ 200 per month.  The property, prior to 1948, had rented for $ 140 per month.  It was purchased for his father in 1948 at petitioner's suggestion.  The purchase price was $ 9,800.  The rental under the percentage arrangement was in excess of $ 20,000 for each of the years involved.  Held, that petitioner failed to sustain his burden of proving that payments made by him under the lease in excess of $ 3,600 per year were required to be made as a condition to continued use of the premises within the meaning of section 23 (a) (1) (A) of the Internal Revenue Code of 1939.2. Petitioner made certain payments in 1950 for dues to an association of liquor dealers, the funds of which association were used in the main for propaganda purposes and for campaign expenses in conjunction with *222 a 1950 liquor referendum to influence voters to vote "wet." Held, that such payments were not deductible as ordinary and necessary business expenses under either section 23 (o) or 23 (a) of the Internal Revenue Code of 1939, Regulations 111, sections 29.23 (o)-1 and 29.23 (q)-1.  Textile Mills Securities Corporation v. Commissioner, 314 U.S. 326">314 U.S. 326; Mary E. Bellingrath, 46 B. T. A. 89.3. Held, that one-half of amounts paid by petitioner in 1949 to a country club, and one-half of amounts paid by him in 1950 to Exchange Club and two country clubs are allowable as ordinary and necessary business expenses.  Held, further, that petitioner failed to show what connection, if any, a payment to the Medical Wives Auxiliary bore to his retail liquor business.  Respondent's disallowance of a deduction therefor sustained.  Clyde W. Key, Esq., for the petitioners.Herman Wolff, Jr., Esq., for the respondent.  Fisher, Judge.  FISHER*50  The respondent determined deficiencies in income taxes of petitioners for the taxable years 1948, 1949, and 1950, in the amounts of $ 8,691.08, $ 10,356.79, and $ 9,391.64, respectively.The issues presented are: (1) Whether payments made by petitioner in excess of $ 3,600 *223 per year under a lease arrangement with his father were deductible as rent under section 23 (a) (1) (A); (2) whether dues payments made by petitioner to a liquor dealers' association were ordinary and necessary business expenses; and (3) whether payments made by petitioner to certain local organizations were ordinary and necessary business expenses.FINDINGS OF FACT.The facts are partly stipulated and, to the extent so stipulated, are incorporated herein by reference.Petitioners, husband and wife, residing in Clinton, Tennessee, timely filed joint income tax returns on an accrual basis for each of the taxable years 1948, 1949, and 1950, with the then collector of internal revenue for the district  of Tennessee.1. Herbert Davis (hereinafter sometimes referred to as petitioner) owned and operated a retail liquor store during the taxable years here involved.During such years the retail sale of liquor in Tennessee was regulated under a so-called County Local Option Plan.  Under the plan every county in the State was privileged to hold a referendum election each 2 years to determine whether retail liquor stores would be permitted to operate in that county.  If the vote was favorable to the *224 establishment and operation of retail liquor stores, such establishment was thereafter permitted for the following 2 years within the corporate limits of incorporated cities located within the county and having a population of more than one thousand.  The legislative body of such incorporated cities was empowered to restrict the number and location of such stores.*51  On November 4, 1947, a liquor referendum election was held in Anderson County, Tennessee.  The result of the referendum was to make legal the operation of retail liquor stores in Anderson County after January 1, 1948.  Previously, there had been five liquor referendum elections held in Anderson County between 1933 and November 1947, none of which had resulted in permitting the operation of retail liquor stores in the county.In December 1947, the City of Clinton, by ordinance (in effect throughout the period here involved), limited to three the number of retail liquor stores to be permitted to operate within the city's corporate limits, and restricted the location of the 3 stores to both sides of 3 city blocks on Depot Street (now known as Market Street).  These 3 blocks are situated approximately in the center of the retail *225 business district of the city.Prior to 1948, petitioner had been engaged in the theater business.  He had also been connected with the Tennessee Eastman Corporation and employed with T. V. A. for several years.  He had had no experience in the liquor business.  He was selected by the city council, which had authority to issue liquor licenses, as one of the three persons to be granted a retail liquor license, provided that he agree to remain neutral in certain litigation that had been commenced by the "drys" to contest the results of the November 4, 1947, referendum. Petitioner was advised that the litigation would last about 2 months' time and that, if the drys were successful, his new business venture would last just that long, otherwise he would be able to engage in the liquor business for at least the next 2 years until the next referendum was held.  Petitioner secured his first license to sell whisky in Clinton, Tennessee, on December 17, 1947.  The license was granted for a 2-year period.L. B. Parker owned a building within the permissible zone for operation of a liquor store, suitable to such use.  Parker permitted petitioner to insert the address of that building in his application *226 for a license. In order that petitioner might so use the Parker building address a lease agreement was drawn between Parker and petitioner in accordance with which the building was rented to petitioner for $ 150 per month.  It was clearly understood that the lease agreement was entered into solely to permit petitioner to use the address of Parker's building for the purpose of securing the license, and that the parties would then negotiate for a more permanent lease on the premises.  Petitioner and Parker began such negotiations which included discussion of a percentage of gross sales from 6 per cent to 8 per cent with a guaranteed rent of $ 150 per month, and an option to purchase at a price range between $ 35,000 and $ 37,000.  The negotiations did not materialize into a final agreement.  Parker thereafter leased the building to the State of Tennessee for $ 125 per month.*52  Petitioner then learned of the existence of another suitable building within the permissible zone, owned by Rufus E. Leinert.  Dr. Hoskins, a friend of petitioner's and of Leinert's, came to petitioner and informed him that the Leinert building was available.  He first suggested that petitioner rent the premises. *227  The Leinert building was then being rented at $ 140 per month.  Hoskins also told petitioner he thought that he could make arrangements to buy the building.  Petitioner did not have sufficient funds of his own to buy the building, though he could probably have borrowed enough money to do so.  He felt also that because he had no assurance that he would be able to remain in business beyond 2 months, he did not want to undertake the risks involved in such a purchase.Petitioner suggested to his father, J. L. Davis, a retired businessman residing in Miami, Florida, that the building was a good buy and that he buy it.  Petitioner went to Miami to discuss the matter  with his father.  The Leinert building could be purchased for $ 9,800.  Petitioner's father was willing to purchase the building if petitioner would repay him $ 5,000 which petitioner had borrowed from his father in 1946 and apply such amount to the purchase price of the property.  It was so agreed and J. L. Davis gave petitioner the additional $ 4,800 with which to purchase the Leinert building.  It was understood that petitioner would purchase the property in his father's name.Upon his return to Clinton, petitioner turned *228 over $ 9,800, including the $ 4,800 he had received from his father, to Dr. Hoskins, who had theretofore conducted all of the negotiations with Leinert.  On December 22, 1947, Dr. Hoskins, who had in the meantime acquired title to the Leinert building, conveyed the building to petitioners, Herbert Davis and wife, Georgia Davis.  The deed of conveyance of the Leinert building from Dr. Hoskins to petitioners was recorded on February 27, 1948.Petitioners took title to the Leinert building in their own names rather than in the name of Herbert's father, J. L. Davis, as had been agreed, because Herbert felt that Dr. Hoskins would not agree to sell the property to his father.  Dr. Hoskins had an interest in a wholesale liquor store in Clinton and petitioner thought that Hoskins would want petitioner to "push whisky that they sold." By warranty deed dated January 1, 1948, petitioners conveyed the Leinert building to J. L. Davis and his wife.  This deed was recorded on March 15, 1949.Also, on January 1, 1948, petitioner as lessee and his father as lessor executed a 2-year lease agreement for the Leinert building wherein it was provided, inter alia, as follows:It is contracted and agreed by *229 and between the parties hereto that the amount of said rental, payable to the lessors, shall be a sum equal to five per cent (5%) of the total gross retail sales of a retail liquor store business to be conducted on said premises, but in no event shall the minimum rental payable hereunder be *53  less than Two Hundred Dollars ($ 200.00) per month.  Said minimum monthly rental of Two Hundred Dollars ($ 200.00) per month shall be due and payable on or before the 10th day of the following calendar month. * * *Thereafter the lease agreement was extended orally by the parties for another 2 years.On February 2, 1948, petitioner again borrowed $ 2,000 from his father in order to buy merchandise with which to open his retail liquor store.Abe E. Wender, petitioner in the related proceeding and the second licensee in Clinton, shortly after being awarded his license contacted a few people to ascertain whether or not any property was available for rent. He found one property that might have been available to him had already been taken by Maynard Sample, the third licensee. Wender, however, felt that if he could not find suitable premises on the open market that he would always be able to rent certain *230 premises owned by his mother.  It was this latter property which Wender finally rented. Prior thereto, the premises were occupied by a billiard parlor and were rented for $ 125 a month.Maynard Sample, the third retail liquor store licensee for Clinton, searched for a location for his business for 2 weeks and negotiated with five or six people during that time.  In the course thereof, one property owner proposed to lease him a location at a rental of 6 per cent of gross receipts.  Sample did not accept these terms but opened his first retail liquor store in a building for which he paid a rental of $ 125 a month.  He occupied this building for about 18 or 20 months after which time he moved to a better location.  The second location was a new building which was constructed for Sample by the owner of the lot.  Sample had advanced $ 10,000 for the construction of the building and in exchange therefor received credit for 26 months' rent at $ 385 per month.  The new building was a little larger than the building occupied by Wender and a little smaller than the building occupied by Davis.  Sample did not enter into a percentage arrangement in renting either property.Troy Dykes operated the *231 only retail liquor store in the city of Norris, which is located in Anderson County about 6 miles from Clinton.  He first opened his store in 1950.  The premises which he occupied were leased from the Norris Land Company, which organization controlled all of the properties suitable for conduct of such a business in Norris.  Dyke's rent was 9 per cent of gross income with a guaranteed minimum rental of $ 300 per month.Percentage leases were in common and general use for numerous different types of business during the years 1948, 1949, and 1950.  Leases for retail liquor stores were reported by real estate operators in some areas with  provisions requiring payments by the tenant from 6 per cent to 8 per cent of gross sales.*54  Petitioner paid rentals under his lease contract with his father in the following amounts:1948$ 22,073.95194923,504.02195020,308.85The entire rental for 1948 was paid by a single check dated December 31, 1948.2. A liquor referendum election was again held in Anderson County on April 8, 1950, following which another election contest suit ensued.The Anderson County Liquor Dealers Association (hereinafter referred to as ACLDA) was a voluntary unincorporated association *232 of liquor dealers in Anderson County up to December 20, 1950, on which date it was incorporated as a nonprofit organization.  The purposes of the organization as set forth in its charter of incorporation are as follows:supervising and providing for the sale of alcoholic beverages in a legal and proper manner, promoting the use of alcoholic beverages only in moderation, providing for amicable settlement of business differences among its members, promoting contributions to charitable or public welfare organizations, and such other purposes as may be lawfully promoted for the proper mutual benefit of  its members.ACLDA funds were used mainly to defray the expense of a campaign designed to persuade the voters of the county to vote in the liquor referendum elections in favor of allowing the retail sale of liquor, including certain car and registration expenses incurred in getting people qualified to vote, and in behalf of the legal liquor interests of the county to finance the cost of the litigation over the referendum election.ACLDA's records reveal, among others, the following expenditures and notations:March 3, 1950$ 1,500Attorney's fees.Up to March 16, 1950991Registration expense.March 31, 19504,200Election expense.April 7, 1950200Election expense.700Election expense.475Election whisky.40Election officers.400Transportation.April 8, 1950425Transportation.394Transportation.April 25, 19504,500Court costs.500Anderson County referendum.Total$ 14,325Such *233 expenses constituted the greater portion of the total $ 19,751.65 expended by ACLDA during the period of the 1950 referendum election.*55  ACLDA meetings were held mainly at election time.During 1950, petitioner paid $ 3,252.45 to ACLDA as dues and claimed such amount as a deduction for business expenses.  The following payments were included therein:March 2, 1950$ 1,000.00March 29, 1950700.00April 7, 1950335.00April 15, 1950600.00June 7, 1950118.79August 2, 1950136.97September 21, 1950141.09October 9, 1950100.70Total$ 3,130.553. In 1949, petitioner paid to the Oak Ridge Golf and Country Club $ 60, which amount he claimed as a deduction on his income tax return for 1949 as an advertising expense.In 1950, petitioner made the following payments which he claimed as deductions in that year for advertising expenses:Oak Ridge Golf & Country Club$ 6Medical Wives Auxiliary12Oak Ridge Golf & Country Club15Exchange Club20Oak Ridge Golf & Country Club12Deane Hill Country Club60Total$ 125Petitioner first joined the two country clubs and the Exchange Club after he opened his retail liquor business in 1948.  He visited them thereafter only for the purpose of increasing his liquor sales to persons he *234 would meet through such association.  The two country clubs had the usual club facilities, including a golf course and swimming pool, and dances were conducted at each.  Neither petitioner nor any member of his family played golf or made use of the club swimming facilities.  Petitioner has not visited either of the country clubs since he discontinued his liquor business.We find as an ultimate fact that one-half of the amount paid to the Oak Ridge Golf and Country Club in 1949, and one-half of the amounts paid, respectively, to said club, to the Exchange Club, and to the Deane Hill Country Club in 1950 were paid in making contacts in an effort to promote increased sales of petitioner's retail liquor.OPINION.1. Respondent has disallowed rental payments made by petitioner in 1948, 1949, and 1950, in excess of $ 3,600 per year on the ground that such amounts were excessive and were not required *56  to be made as a condition to the continued use or possession of the property under section 23 (a) (1) (A).Section 23 (a) (1) (A) provides for the deduction of all ordinary and necessary business expenses, including "rentals or other payments required to be made as a condition to the continued use *235 or possession * * * of property to which the taxpayer has not taken or is not taking title or in which he has no equity." The statute does not specifically limit  deductibility to a "reasonable" amount as in the case of the allowance for salary or compensation.A taxpayer may freely rent business property on such terms as he thinks appropriate or otherwise necessary for the conduct of his business and such terms will generally be respected for tax purposes.  However, the rental arrangement must, in fact, be what it purports to be if a deduction for rental payments is to be allowed.  In circumstances where the lessor and the lessee are closely related and their dealings have not been at arm's length, the transaction offers a ready means for channeling earnings from one member of a family to another, and invites careful scrutiny to determine whether the amounts paid as rent were required to be so paid within the meaning of the statute.  Roland P. Place, 17 T. C. 199 (1951), affirmed per curiam (C. A. 6, 1952) 199 F. 2d 373; Stanwick's, Inc., 15 T. C. 556 (1950), affirmed per curiam (C. A. 4, 1951) 190 F.2d 84">190 F. 2d 84.It is not necessary for us to determine whether such payments as may be in *236 excess of those required, within the meaning  of the statute, were in reality a gift, or a diversion of income, or whether the transaction was a sham.  See Utter-McKinley Mortuaries v. Commissioner, (C. A. 9, 1955) 225 F.2d 870">225 F. 2d 870, affirming a Memorandum Opinion of this Court.  We need only inquire into the extent, if any, to which such payments were in fact in excess of what was required to be made as a condition to the continued use and the occupancy of the property.  To the extent of any such excess, the payments are not deductible. In Roland P. Place, supra, we said (p. 203):The basic question is not whether these sums claimed as a rental deduction * * * were in fact rent instead of something else paid under the guise of rent. The inquiry is whether the petitioner was in fact and at law "required" to pay these sums as rent. * * *Such an inquiry in a situation involving a family transaction requires a careful examination of the circumstances surrounding the rental of the property to determine the intentions of the parties in agreeing upon a lease and in fixing the terms thereof.  In this connection, consideration must be given to the reasonable rental value of the property had the *237 lease been entered into in an arm's-length transaction.  As we said in Jos. N. Neel Co., 22 T. C. 1083 (1954), "a critical examination of all the evidence bearing upon the transaction involved, * * * is required to determine the true character of the item * * *."*57  Respondent, in his statutory notice, allowed a rental deduction of $ 3,600 a year.  His determination is presumed to be correct and the burden is on petitioner to establish error.  We think, upon the basis of the following analysis, that petitioner has failed to do so.Petitioner and two others knew that they were to be the sole licensees for the sale of liquor in Clinton.  We think it was quite apparent to them that their monopoly under local option would produce gross sales to each which would be quite substantial.  It must have been equally obvious to petitioner (and Wender, who made an identical arrangement with his mother) that a percentage lease providing for the payment of 5 per cent of gross sales would yield far more to his parents than a fair rental for the use of the property.The property used by petitioner was purchased by arrangement with his father at the inception of the period of operation under local option, *238 and for the sole purpose of taking advantage of the opportunity afforded by the "wet" victory.  Prior to petitioner's occupancy, the property rented for only $ 140 a month.  The whole property was purchased for only $ 9,800.  Under the percentage lease, the rents on the basis of 5 per cent of gross sales were $ 22,073.95 for 1948, $ 23,504.02 for 1949, and $ 20,308.85 for 1950.Much the same picture is found in the case of Wender who leased from his mother.  Prior to such lease, the property rented for $ 125 a month.  Under a percentage lease arrangement substantially identical with that of petitioner, he paid his mother $ 17,933.41 for the year 1949.The startling contrast of the rentals paid by petitioner and Wender to parents with the rentals for the same properties immediately prior thereto is, if anything, accentuated by the experience of Sample, the third licensee, who leased his place in an arm's-length transaction.  For operating a comparable liquor store in the same community, with the same special privileges, he leased the premises known as the Fred Lyons Building for $ 125 per month in 1948 and 1949.  Later,  he arranged with another property owner to have a new building erected. *239  He financed it by advancing $ 10,000 for which he received credit for 26 months' rent, or an average monthly rental of $ 385.We think the facts relating to the three licensees present the key to the solution of the problem before us.  We do not think that petitioner or Wender would have entered into any such arrangement with anyone other than members of the family.  It is apparent, as already indicated, that they must have known that the percentage leases would produce sums greatly in excess of fair rentals. Moreover, it is clear that they have failed to establish that the allowance of $ 3,600 a year determined by respondent (which was in excess of the minimum rental of $ 200 per month provided for in both petitioner's *58  and Wender's lease) was less than a fair amount required to be paid for the continued use of the property.We have, of course, considered the testimony in the record concerning percentage leases. We fully realize that such arrangements were in common and general use during the years in question.  The issue before us, however, is not that of the propriety of percentage leases. Our problem relates to a specific percentage lease executed under the special circumstances *240 we have already outlined.We note that inquiries were made in Tennessee and Florida concerning percentage leases in the retail liquor trade.  The sources of the information, however, were not before the Court, and there is nothing to indicate that the circumstances paralleled those in the instant case.  We are told nothing of the cost, value, or rental value of the properties leased, the relation of the percentage to rental value, or whether the lessees were operating under normal competitive conditions.  The same comment may be made with respect to the testimony of Brownlow, who obviously had no knowledge of the background circumstances on which were based the percentage arrangements to which he referred.  We note, also, that although Brownlow testified as an expert, he was not asked to express an opinion as to the fair rental value of petitioner's store either on a fixed rental or percentage lease basis.With respect to the negotiations with Parker, we need only mention that they never came to fruition.The circumstances of the Troy Dykes' lease of property in Norris, Tennessee, cannot be taken to lead to a different conclusion.  It is true he was a retail liquor dealer, and that he *241 had a comparable monopoly in his town (only two liquor stores were permitted) and that he entered into a lease (with lessors to whom he was not related) which called for a percentage of 9 per cent of gross income.  It is obvious that gross income would be much less than gross receipts in an enterprise of this type, but there is nothing in the record from which we can correlate or compare on a percentage basis, or otherwise, the ultimate rent paid by Dykes to that paid by petitioner.  Another significant factor is that here the monopolist licensee of the liquor store met face to face with his counterpart -- the owner of all of the property in Norris available for the operation of such a store.  Thus, even if we were in a position to compare Dykes' ultimate rent with that of petitioner, the result could hardly be determinative.  We add that there is no evidence of the fair rental value of Dykes' store on either a straight rental or percentage lease basis.As indicated above, therefore, we must sustain respondent on this issue.2. Respondent has disallowed as a deduction an amount of $ 3,252.45 paid by  petitioner in 1950 for dues to ACLDA.  There is no dispute *59  as to the amount so paid. *242  Respondent determined that such sum constituted a nondeductible expenditure under either section 23 (a) (1) or 23 (o) as one made for "lobbying purposes, the promotion or defeat of legislation, the exploitation of propaganda, including advertising other than trade advertising, and contributions for campaign expenses." Regs. 111, secs. 29.23 (o)-1 and 29.23 (q)-1.  The burden of proving otherwise is upon the petitioner.The law is well settled.  In Textile Mills Corp. v. Commissioner, 314 U.S. 326">314 U.S. 326 (1941), the Supreme Court, in a case involving donations made by a corporation, gave its approval to the substance of the regulations here involved when it sanctioned the then applicable provision of Regulations 74 containing precisely the same language presently included in Regulations 111, sections 29.23 (o)-1 and 29.23 (q)-1.  The application of such principles to limit the deductibility of donations of individuals under section 23 (o) by Regulations 111, section 29.23 (o)-1, is equally valid. Textile Mills Corp., supra;Mary E. Bellingrath, 46 B. T. A. 89 (1942); 2Mrs. William P. Kyne, 35 B. T. A. 202 (1936). We have also held that the principles embodied in such regulations were applicable *243 as well under section 23 (a).  McClintock-Trunkey Co., 19 T.C. 297">19 T. C. 297, 304 (Issue 2), reversed on another issue (C. A. 9, 1954) 217 F. 2d 329. See also American Hardware & Eq. Co. v. Commissioner, (C. A. 4, 1953) 202 F. 2d 126, affirming a Memorandum Opinion of this Court.We think petitioner has not met his burden of proving that no substantial part of the funds of ACLDA were used for the purpose of carrying on propaganda or otherwise attempting to influence legislation within the meaning of those terms under section 23 (o) of the Internal Revenue Code.  On the contrary, all of the evidence before us establishes quite clearly that ACLDA funds were used mainly to defray the expenses of a campaign designed to persuade the voters of Anderson County to vote wet in the liquor referendum of 1950, and also to finance the cost of ensuing litigation.  The ACLDA appears to have been active and held meetings only around election time.  At such time it spent its funds on registration fees for voters, automobile transportation for voters, presumably to the polls, liquor which was distributed to undisclosed *244 persons, and to pay for election officers.  Numerous other expenditures are listed in the ACLDA records along with rather cryptic notations which appear to be in much the same vein as the aforementioned expenditures. They have not been identified specifically by petitioner or his witnesses.  Since the burden of proof is upon petitioner to overcome the respondent's determination, *60  we think he must show the nature of such expenditures to be otherwise.  He has not done so, and thus has failed in his burden of proof.Mary E. Bellingrath, supra, is here decisive.  In that case, the taxpayer was a member of several partnerships which were engaged in the business of bottling and distributing soft drinks.  Such partnerships were members of the Alabama Bottlers' Association, a nonprofit organization, formed to promote the interests of those engaged in the bottling and distribution of soft drinks in Alabama.  The partnerships contributed funds to such association in the year 1936.  At that time legislation proposing to establish a 20 per cent tax on the sale of soft drinks was pending before the Alabama Legislature.  Members of the association were opposed to the passage of such legislation. *245  Data, information, and other material were gathered by the organization and paid for out of the funds contributed to the association.  Such data and information were being gathered for the use of the members of the association as a basis for their testimony at legislative committee hearings.  We held that the funds of the association were expended in the main for the defeat of proposed legislation and thus fell within the precise language of the then applicable regulations, and that the petitioner's contribution to such association was not deductible. See also H. R. Cullen, 41 B. T. A. 1054 (1940).Petitioner cites Independent Brewing Co. of Pittsburgh, 4 B. T. A. 870 (1926) (funds used for attorneys' fees incurred in testing the constitutionality of the Prohibition Act), George Ringler & Co., 10 B. T. A. 1134 (1928) (expenditures made for counsel fees incurred to test constitutionality of wartime prohibition legislation, to conduct an investigation into whether the alcoholic content of certain beer was intoxicating, and to carry on a campaign against certain assertions made by the Anti-Saloon League), Best Brewing Co., 16 B. T. A. 1354 (1929) (contributions to a trade organization *246 engaged in performing certain regulatory services for and furnishing information to its members), and several Memorandum Opinions of this Court.  All, however, are clearly distinguishable from the instant case, since none involved the expending of any moneys for defeating or promoting legislation, campaign expenses, or otherwise conducting propaganda related to such purposes.3. In 1949, petitioner paid $ 60 to the Oak Ridge Golf and Country Club and claimed such amount as a deduction on his income tax return for 1949.  In 1950, he paid $ 33 to the Oak Ridge Golf and Country Club, $ 60 to the Deane Hill Country Club,  $ 20 to the Exchange Club, and $ 12 to the Medical Wives Auxiliary, a total of $ 125, which amount he also claimed as a deduction on his income tax return for 1950.  Respondent has disallowed such deductions for both of the years on the ground that they did not constitute ordinary and necessary business *61  expenses but were personal expenditures within the meaning of section 24 (a) (1).  The burden of proof is upon petitioner and he must show that these expenditures so paid to the several organizations were related to the conduct of his liquor business in Clinton and were *247 ordinary and necessary to the operation thereof.The evidence in the record is meager.  It leaves no doubt in our mind that the reason petitioner joined the three clubs was to make contacts in an effort to promote sales for his retail liquor store. The record fails to show, however, the specific purpose of each of the expenditures made, and it does not negative the possibility that some part thereof was spent for such purposes as meals for himself and members of his family.  On the other hand, the evidence establishes that neither petitioner nor any member of his family used either the golf course or the swimming pool of either of the country clubs. Considering the testimony as a whole relating to this issue, we think we may reasonably infer that at least half of the expenditures were for business purposes, and constituted ordinary and necessary expenses.  Under the principles of Cohan v. Commissioner, (C. A. 2, 1930) 39 F.2d 540">39 F.2d 540, we allow petitioner the deduction of one-half of the amount paid to Oak Ridge Golf and Country Club in 1949, and one-half of the amounts paid, respectively, to said club, to the Exchange Club, and to the Deane Hill Country Club in 1950.The petitioner has not *248 offered any evidence in regard to the payment of money to, or his or his wife's association with, the Medical Wives Auxiliary.  There is nothing in the record to indicate the nature of such organization or the benefit that might be derived by him through association with it.  We hold, therefore, that petitioner has failed to show that such expenditure was in any way related to the conduct of his trade or business or was otherwise deductible under section 23 (a) (1).Decision will be entered under Rule 50.  Footnotes1. The first issue presented in this proceeding is quite similar to the issue involved in the case of Abe E. Wender v. Commissioner, Docket No. 51519, in which case Findings of Fact and Opinion have also been filed this day.  The proceedings in the two cases have not been consolidated.  It has been stipulated, however, that there shall be incorporated as evidence into the record in each case, so far as relevant thereto, all of the evidence introduced in the other proceeding.↩2. The provisions of Regulations 94 there involved are identical with those presently before us.↩