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TITLE 26-INTERNAL REVENUE CODE (B) An activity described in section 212 shall be treated as a trade or business. (b) Gifts (1) Limitation No deduction shall be allowed under section 162 or section 212 for any expense for gifts made directly or indirectly to any individual to the extent that such expense, when added to prior expenses of the taxpayer for gifts made to such individual during the same tax- able year, exceeds $25. For purposes of this section, the term "gift" means any item ex- cludable from gross income of the recipient under section 102 which is not excludable from his gross income under any other provi- sion of this chapter, but such term does not include- (A) an item having a cost to the taxpayer not in excess of $4.00 on which the name of the taxpayer is clearly and permanently im- printed and which is one of a number of identical items distributed generally by the taxpayer, (B) a sign, display rack, or other promo- tional material to be used on the business premises of the recipient, or (C) an item of tangible personal property having a cost to the taxpayer not in excess of $100 which is awarded to an employee by reason of length of service or for safety achievement. (2) Special rules (A) In the case of a gift by a partnership, the limitation contained in paragraph (1) shall apply to the partnership as well as to each member thereof. (B) For purposes of paragraph (1), a hus- band and wife shall be treated as one tax- payer. (c) Certain foreign travel (I) In general In the case of any individual who travels outside the United States away from home in pursuit of a trade or business or in pursuit of an activity described in section 212, no deduc- tion shall be allowed under section 162, or sec- tion 212 for that portion of the expenses of such travel otherwise allowable under such section which, under regulations prescribed by the Secretary, is not allocable to such trade or business or to such activity. (2) Exception Paragraph (1) shall not apply to the ex- penses of any travel outside the United States away from home if- (A) such travel does not exceed one week, or (B) the portion of the time of travel out- side the United States away from home which is not attributable to the pursuit of the taxpayer's trade or business or an activ- ity described in section 212 is less than 25 percent of the total time on such travel. (3) Domestic travel excluded For purposes of this subsection, travel out- side the United States does not include any travel from one point in the United States to another point in the United States. (d) Substantiation required No deduction shall be allowed- (1) under section 162 or 212 for any travel- ing expense (including meals and lodging while away from home), (2) for any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or re- creation, or with respect to a facility used in connection with such an activity, or (3) for any expense for gifts, unless the taxpayer substantiates by adequate records or by sufficient evidence corroborating his own statement (A) the amount of such ex- pense or other item, (B) the time and place of the travel, entertainment, amusement, recrea- tion, or use of the facility, or the date and de- scription of the gift, (C) the business purpose of the expense or other item, and (D) the business relationship to the taxpayer of persons enter- tained, using the facility, or receiving the gift. The Secretary may by regulations provide that some or all of the requirements of the preced- ing sentence shall not apply in the case of an expense which does not exceed an amount pre- scribed pursuant to such regulations, (e) Specific exceptions to application of subsection (a) Subsection (a) shall not apply to- (1) Business meals Expenses for food and beverages furnished to any individual under circumstances which (taking into account the surroundings in which furnished, the taxpayer's trade, busi- ness, or income-producing activity and the re- lationship to such trade, business, or activity of the persons to whom the food and bever- ages are furnished) are of a type generally considered to be conducive to a business dis- cussion. (2) Food and beverages for employees Expenses for food and beverages (and facili- ties used in connection therewith) furnished on the business premises of the taxpayer pri- marily for his employees. (3) Expenses treated as compensation Expenses for goods, services, and facilities, to the extent that the expenses are treated by the taxpayer, with respect to the recipient of the entertainment, amusement, or recrea- tion, as compensation to an employee on the taxpayer's return of tax under this chapter and as wages to such employee for purposes of chapter 24 (relating to withholding of income tax at source on wages). (4) Reimbursed expenses Expenses paid or incurred by the taxpayer, in connection with the performance by him of services for another person (whether or not such other person is his employer), under a reimbursement or other expense allowance arrangement with such other person, but this paragraph shall apply- (A) where the services are performed for an employer, only if the employer has not treated such expenses in the manner pro- vided in paragraph (3), or (B) where the services are performed for a person other than an employer, only if the Page 218 § 274