Churchill Downs Insists Entertainment Expenses Are Fully Deductible

Churchill Downs Inc. listed $397,000 in deductions on its 1994 and 1995 income tax returns arising from entertainment expenses it incurred in holding Kentucky Derby and Breeders' Cup events, such as the Sport of Kings dinner, cocktail parties, a press breakfast, and winners' parties. The IRS determined $73,000 in deficiencies for those years, asserting that the claimed deductions were limited by section 274(n)(1). Churchill Downs contested the disallowance of the expenses, arguing that the purpose of the events was to add to the "overall glamour and prestige" of its races. The corporation contended that all the claimed costs met the requirements for deductions as ordinary and necessary business expenses.

The Tax Court agreed with the IRS and held that the expenses were subject to the section 274 limitation, finding that even though the corporation was in the entertainment business, the costs at issue were entertainment expenses that could not be categorized as "part of the entertainment product." The court also rejected Churchill Downs's alternative argument that its expenses were excludable under section 274(e)(7) or (8) because they were used to pay for items available to the public and for entertainment sold to customers. The court found that, although the horse races were open to the public, the entertainment associated with them included invitation-only events for selected horsemen, Churchill Downs employees, media representatives, and local dignitaries. The court noted that these expenses were borne by Churchill Downs and the goods and services were given away.(For a summary of this opinion, see Tax Notes, Oct. 2, 2000, p. 77; for the full text, see Doc 2000-24768 (13 original pages) or 2000 TNT 188-9 .)

Churchill Downs argues that the Tax Court erred in determining that the entertainment expenses were subject to the fifty-percent limitation of section 274. The corporation emphasizes that it is in the entertainment business and incurred the expenses producing and promoting its entertainment product, and therefore the expenses are not entertainment expenses for purposes of section 274(n). In the alternative, Churchill Downs insists that the entertainment expenses are fully deductible and protected from the fifty-percent limitation by sections 274(e)(7)or(8) because they involved items available to the public or entertainment sold to customers.

[1] Petitioners request oral argument. This case involves a question of first impression regarding limitations on the deductibility of certain business expenses incurred in the presentation of world-renowned sporting events such as the Kentucky Derby and the Breeders' Cup. Oral argument will assist the court in reaching a full understanding of the unique nature of these events and the expenses in question. Oral argument would also allow the attorneys for both parties to address any outstanding factual or legal issues which this Court deems relevant. Accordingly, Petitioners Churchill Downs, Inc. and Subsidiaries (hereinafter "Petitioners") believe that oral argument is appropriate.

STATEMENT OF SUBJECT MATTER AND APPELLATE JURISDICTION

[2] Petitioners maintain their principal place of business at 700 Central Avenue, Louisville, Kentucky 40208 and filed their consolidated federal corporate income tax returns for their 1994 and 1995 tax years with the Internal Revenue Service Center at Covington, Kentucky (R. 7, Stipulation of Facts ("Stip.") Exs. 2-J & 3-J, JPX___). On January 29, 1999, Respondent issued a statutory notice of deficiency to Petitioners with respect to their 1994 and 1995 tax years (R. 7, Stip. Ex. 1-J, JPX___)

[3] On April 28, 1999, Petitioners petitioned the United States Tax Court for a redetermination of the above-mentioned tax deficiencies (R. 1, Petition to Tax Court, JPX___). Following the parties' agreement to stipulated facts and submission of briefs, on November 15, 2000 the United States Tax Court (Judge David Laro) upheld the tax deficiencies alleged by Respondent (R. 12, Tax Court Final Decision, JPX___). On February 8, 2001, Petitioners appealed the decision of the United States Tax Court to this Court (R. 13, Notice of Appeal, JPX___). Subject matter and appellate jurisdiction are appropriate in this Court pursuant to the Internal Revenue Code of 1986, as amended ("I.R.C.") section 74822 (2000); Fed. R. App. P. 13; T.C. Rule 190.

STATEMENT OF ISSUE FOR REVIEW

[4] Whether Petitioners are allowed to deduct expenses incurred during tax years 1994 and 1995 in producing certain Kentucky Derby and Breeders' Cup events at Churchill Downs without the fifty percent (50%) limitation of I.R.C. section 274(n) for entertainment expenses.

STATEMENT OF THE CASE

[5] Petitioners own and operate Churchill Downs, the home of the Kentucky Derby. Churchill Downs also hosted the Breeders' Cup, thoroughbred horse racing's richest day, in 1988, 1991, 1994, 1998, and 2000. Petitioners' Derby events include the Sport of Kings Gala -- a press-reception cocktail party and dinner during Derby week -- and other promotional activities designed to generate media and public interest in the Derby. Under their contract with Breeders' Cup Limited ("BCL"), Petitioners are expressly obligated to conduct certain promotional activities designed to enhance the significance of the Breeders' Cup, including the Breeders' Cup press-reception cocktail party and dinner. Petitioners bear the costs of the Sport of Kings Gala, the Breeders' Cup dinner, and other similar events.

[6] Invitees to the Sport of Kings Gala in 1994 and 1995 and the Breeders' Cup dinner in 1994 included members of the media, members of the horse industry, dignitaries, and celebrities. The attendance of these people was essential to the successful production of the Derby and the Breeders' Cup. Their presence at Churchill Downs events in the days leading up to the races enhanced the prestige of the races and gave rise to significant media attention. The Sport of Kings Gala and Breeders' Cup dinner thus promoted and enhanced the Kentucky Derby and Breeders' Cup during 1994 and 1995.

[7] On their 1994 and 1995 tax returns, Petitioners recognized that certain entertainment expenses were subject to the fifty-percent (50%) limitation of I.R.C. section 274(n)(1). However, Petitioners deducted the full cost of the Sport of Kings Gala, the Breeders' Cup dinner, and other similar events on their 1994 tax returns and the full cost of the Sport of Kings Gala and other similar events on their 1995 tax returns. Those expenses are unique and directly related to Petitioners' primary business purpose, excluding them from application of I.R.C. section 274(n)(1) or triggering the protection of I.R.C. section 274(e)(7)-(8).

[8] In a January 29, 1999 notice of tax deficiency, Respondent rejected Petitioners' full deduction of the above-referenced expenses for tax years 1994 and 1995, arguing they are subject to I.R.C. section 274(n)(1)'s fifty percent (50%) limitation. The Tax Court upheld Respondent's position. Petitioners now seek from this Court a determination that their expenses for hosting the Sport of Kings Gala, the Breeders' Cup dinner, and other similar events are fully deductible business expenses and not subject to I.R.C. section 274(n)(1)'s fifty percent (50%) limitation for entertainment expenses.

STATEMENT OF FACTS

A. INTRODUCTION

[9] Petitioners own and operate Churchill Downs racetrack, the internationally known home of the Kentucky Derby since 1875 (R. 7, Stip. paragraph 21 and Stip. Ex. 10-J, JPX___). Petitioners are corporations which file a consolidated federal corporate income tax return. Petitioners' legal address, both now and at the time they filed their petition with the Tax Court, is 700 Central Avenue, Louisville, Kentucky 40208 (R. 7, Stip. paragraph 1, JPX___). Petitioners filed their consolidated federal corporate income tax returns for their 1994 and 1995 tax years with the Internal Revenue Service Center at Covington, Kentucky (R. 7, Stip. paragraph 2, JPX___).

[10] On January 29, 1999, Respondent issued a statutory notice of deficiency (the "Notice") to Petitioners with respect to their 1994 and 1995 tax years (R. 7, Stip. paragraph 4 and Stip. Ex. 1-J, JPX___). Respondent asserted in the Notice that Petitioners' deductions for certain expenses related to the Kentucky Derby and the Breeders' Cup for tax years 1994 and 1995 should have been subject to I.R.C. section 274(n)(1)'s fifty percent (50%) limitation rather than fully deductible (R. 7, Stip. Ex. 1-J, JPX___). ¹

[11] Petitioners dispute Respondent's determination that the 1994 Kentucky Derby and Breeders' Cup expenses listed on Exhibit A-1 of the Notice and totaling $282,200 are subject to the fifty-percent (50%) limitation of I.R.C. section 2274(n)(1) (R. 7, Stip. paragraph 9 and Stip. Ex. 1-J, JPX___). Petitioners also dispute Respondent's determination that the 1995 Kentucky Derby expenses listed on Exhibit A-2 of the Notice and totaling $114,993 are subject to the fifty- percent limitation of I.R.C. section 274(n)(1) (R. 7, Stip. paragraph 11 and Stip. Ex. 1-J, JPX___). ²

B. KENTUCKY DERBY EXPENSES

[12] Petitioners' biggest race is the Kentucky Derby, held each year at Churchill Downs on the first Saturday in May. A substantial portion of Petitioners' annual profit is generated during Derby Week. Kentucky Derby events sponsored by Petitioners include (1) the Sport of Kings Gala, (2) a brunch following the post position drawing for the Derby race, (3) a week-long hospitality tent, with coffee, orange juice, and donuts for the press, (4) the Derby race, and (5) the Kentucky Derby Winner's Party (R. 7, Stip. paragraph 22, JPX___). The deductibility of expenses associated with these events, and similar events held in conjunction with the Breeders' Cup, is the crux of this appeal.

[13] The Sport of Kings Gala, the largest Kentucky Derby expense in dispute, includes a press-reception cocktail party followed by a dinner and entertainment. Petitioners bear the costs of the Sport of Kings Gala, including expenses for food, beverages, and entertainment (R. 7, Stip. paragraph 23, JPX___). Employees of Petitioners were in attendance at the Sport of Kings Gala in 1994 and in 1995 (R. 7, Stip. paragraph 24, JPX___). In 1994, the Sport of Kings Gala was held at the Sports Spectrum, an off-track betting facility in Louisville, Kentucky owned by Petitioners (R. 7, Stip. paragraph 25, JPX___). In 1995, the Sport of Kings Gala was held at the Kentucky Fair and Exposition Center in Louisville, Kentucky (R. 7, Stip. 26, JPX___).

C. BEEDERS' CUP EXPENSES

[14] The Breeders' Cup, the thoroughbred horse racing industry's richest day, is held every year and rotates among several premier racetracks. Churchill Downs hosted the Breeders' Cup in 1988, 1991, 1994, and 1998 (R. 7, Stip. Ex. 10-J, JPX___). ³

[15] Under their contract with BCL, Petitioners are obligated to conduct certain promotional activities and events designed to enhance the significance of the Breeders' Cup day of races as a national and international championship event for the sport of racing. Included in these required promotional activities are (1) the Breeders' Cup press-reception cocktail party and dinner, (2) the Breeders' Cup post-draw brunch, and (3) the Breeders' Cup breakfast (R. 7, Stip. Ex. 11-J, JPX___). Petitioners met their contractual obligation and sponsored all three events in connection with the 1994 Breeders' Cup.

[16] In 1994, the Breeders' Cup press-reception cocktail party and dinner were held at the Galt House Hotel in Louisville, Kentucky. Attendance at the Breeders' Cup press-reception cocktail party and dinner is by invitation only, and the expenses for food, beverages, and entertainment are borne by Petitioners. Employees of Petitioners were in attendance at the dinner (R. 7, Stip. paragraph 30, JPX___). Likewise, attendance at the Breeders' Cup press breakfast is by invitation only, and the expenses for food, beverages, and entertainment are borne by Petitioners, whose employees were in attendance at the breakfast (R. 7, Stip. paragraph 31, JPX___).

D. THE NECESSITY OF THE EXPENSES

[17] Petitioners' Kentucky Derby events in 1994 and 1995 were essential to their business of promoting the races and attracting and entertaining horse racing fans in during the all-important Derby Week. The expenses incurred for those events were directly related to the maintenance and expansion of Petitioners' premier racing event. Indeed, Petitioners hosted similar Derby events prior to and subsequent to the years in issue (R. 7, Stip. paragraph 39, JPX___). Likewise, the events hosted by Petitioners in connection with the 1994 Breeders' Cup were necessary to promote that day of racing and Breeders' Cup events similar to those of 1994 were held again in 1998 (Id.).

[18] Excepting Petitioners' employees, invitees to the Sport of Kings Gala in 1994 and 1995 and the Breeders' Cup dinner in 1994 included members of the media, members of the horse industry, dignitaries, and celebrities. Their attendance was essential to promotion of the Derby and the Breeders' Cup. Their presence in Louisville and attendance at Churchill Downs events in the days preceding the races gave rise to related publicity and media attention that helped sustain and advance the prestige of the races and raise public awareness of the upcoming events (R. 7, Stip. 40, JPX___).

[19] Petitioners operate in a highly competitive industry and compete for patrons with other sports, entertainment, and gaming operations, including land-based, river boat, and cruise ship casinos and state lotteries (R. 7, Stip. Ex. 10-J, JPX___). To survive, it is essential that Petitioners generate as much media attention and public interest in their entertainment product as possible in connection with premier races such as the Kentucky Derby and the Breeders' Cup. These races, and the events held in conjunction with them, are Petitioners' best opportunity to showcase to the world the entertainment product they hold out for sale throughout the year.

SUMMARY OF ARGUMENT

[20] Petitioners are in the entertainment business and incurred the subject expenses producing and promoting their entertainment product. I.R.C. section 162 authorizes the deduction of all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Petitioners' expenses in this case are ordinary and necessary expenses. The present issue is whether they should also be considered "entertainment" expenses under I.R.C. section 274(n), which imposes a fifty percent (50%) limit on the deductibility of entertainment expenses.

[21] The subject expenses are not entertainment expenses, just as a manufacturer's hosting of a show to display its wares is not entertainment for purposes of I.R.C. section 274(n). The parties have stipulated that the subject expenses were for events integrally connected to the Kentucky Derby and the Breeders' Cup. Moreover, in the case of the Breeders' Cup, Petitioners were required to incur the subject expenses to earn BCL's business and host the Breeders' Cup races. The Kentucky Derby and the Breeders' Cup are Petitioner's most important opportunities to showcase their product -- thoroughbred horse racing -- to the public. Expenses incurred to promote the Kentucky Derby and the Breeders' Cup as world-class races and to advance the prestige and public awareness of these races are not entertainment for purposes of I.R.C. section 274(n). They are ordinary and necessary expenses, paid or incurred in carrying on a trade or business, deductible pursuant to I.R.C. section 162 without limitation.

ARGUMENT

I. PETITIONERS ARE IN THE ENTERTAINMENT BUSINESS AND INCURRED THE

A. STANDARD OF REVIEW

[23] Review Decisions of the United States Tax Court are reviewed by the Sixth Circuit Court of Appeals under the following standards: Factual findings and mixed questions of law and fact are reviewed for clear error, and legal questions are reviewed de novo. See, e.g., Friedman v. C.I.R., 216 F.3d 537, 541 (6th Cir. 2000); Kenco Restaurants, Inc. v. C.I.R., 206 F.3d 588, 593 (6th Cir. 2000), Cert. denied, 121 S.Ct. 49 (2000).

[24] Statutory interpretation of Internal Revenue Code provisions and related Treasury Regulations by the Tax Court are reviewed de novo. Wolpaw v. C.I.R., 47 F.3d 787, 790 (6th Cir. 1995) ("The Tax Court in this case interpreted Internal Revenue Code provisions and related Treasury Regulations. Therefore, its decision on questions of statutory interpretation is subject to de novo review.") Here, the Tax Court interpreted various sections of I.R.C. section 274 and related Treasury Regulations. Review by this Court should accordingly be de novo.

B. THE SUBJECT EXPENSES ARE NOT ENTERTAINMENT EXPENSES FOR

[26] Treasury regulations indicate that expenses incurred by a manufacturer to showcase its wares to potential customers are not subject to the fifty-percent (50%) limitation of I.R.C. section 274(n). The present circumstances are no different. The subject expenses were incurred to produce and promote events which the government concedes (by Stipulation) are important parts of petitioners' biggest races, the Kentucky Derby and the Breeders' Cup. Events held in conjunction with Petitioners' biggest races and to showcase thoroughbred horse racing (Petitioner's product) are no different from the manufacturer's showcase mentioned in the applicable regulations, to which the fifty-percent (50%) limitation of I.R.C. section 274(n) does not apply.

[27] According to Treas. Reg. 1.274-2(a)(3)(ii), an objective test should be used to determine whether an activity is of a type generally considered to constitute entertainment.

However, in applying this test the taxpayer's trade or business

[28] As Treas. Reg. 1.274-2)(a)(3)(ii) indicates, whether an activity will be treated as "entertainment" for purposes of I.R.C. section 274(n) depends on the nature of the taxpayer's business. Petitioners are in the business of entertainment. As the operator of six (6) racetracks and a leading provider of live horse racing product for the simulcast wagering market, Petitioners are in direct competition for patrons with other sports, entertainment, and gaming operations, including land-based, river boat, and cruise ship casinos and state lotteries. ⁴ One of their racetracks, the Churchill Downs racetrack, has been conducting racing since 1875 and is the internationally-known home of the Kentucky Derby. It is also a regular host of the Breeders' Cup. ⁵

[29] The subject expenses were incurred by Petitioners in producing several events in connection with the Kentucky Derby and the Breeders' Cup. As for the Derby expenses, the Stipulations of Fact provide the subject events are PART OF the Kentucky Derby:

Petitioners' biggest race is the Kentucky Derby. The Kentucky

[30] The attendance of members of the media, members of the horse industry, celebrities, and dignitaries is essential to the successful production of the Kentucky Derby events because it helps to provide the publicity and media attention necessary to sustain and advance the Kentucky Derby (R. 7, Stip. paragraph 40, JPX___). Moreover, the overwhelming majority of invitees to these events current and potential purchasers of Petitioners' entertainment product.

[31] The Kentucky Derby and related events have become a major entertainment event spanning several days and attracting national and worldwide attention. The Kentucky Derby race and the Derby events represent the entertainment "product" that Petitioners offer their patrons and television viewers and are vital to the Success of Churchill Downs. The fact that some of the Kentucky Derby Events are designed to attract special customers of Petitioners (e.g., representatives of the horse industry, members of the media, and local dignitaries) does not alter the fact that they are an integral part of the Kentucky Derby entertainment product.

[32] The events that lead up to the Breeders' Cup are similar to those preceding the Kentucky Derby and, as with the Derby, the events are PART OF the Breeders' Cup. According to the Stipulations of Fact: "PETITIONERS' BREEDERS' CUP EVENTS IN 1994 INCLUDED (1) the Breeders' Cup press-reception cocktail party and dinner, (2) the Breeders' Cup post-draw brunch, and (3) the Breeders' Cup breakfast" (R. 7, Stip. paragraph 38, JPX___) (emphasis added). The importance of these Breeders' Cup events is evident from the contract between BCL and Petitioners, which REQUIRES those events be held (R.. 7, Stip. Ex. 11-J, JPX___). According to Section 12.2 of that contract:

[Petitioners] further agree[] to cooperate and consult with BCL

[33] Respondent's position ignores the business realities associated with staging a world class sporting event in a climate of intense competition. The Kentucky Derby is not just two minutes of horse racing and Petitioners could not survive if they treated it that way. The build-up to such an event, with associated media attention, is a necessary and integral part of the overall entertainment "product" that Petitioners' patrons and television viewers have come to expect. That "product" would be far different (and less valuable) if the Petitioners simply opened the track shortly before the running of the Kentucky Derby or Breeders' Cup races.

[34] Petitioners are in the entertainment business. The parties have stipulated that the events for which the subject expenses were incurred were part of the Kentucky Derby and Breeders' Cup. As such, they were part of the entertainment product that Petitioners created for presentation, promotion, and sale to the public, and therefore critical to the success of the Kentucky Derby, the Breeders' Cup, and Petitioners' business in general. In the case of the Breeders' Cup, the subject expenses were expressly required under the contract between Petitioners and BCL. The subject events allowed Petitioners to showcase their entertainment product not only to invitees, but also to the general public through all-important media attention and coverage.

[35] The expenses at issue were ordinary and necessary expenses for Petitioners' business. They were not simply entertainment. Consistent with the applicable regulations, Petitioners should not be subject to the restrictions of I.R.C. section 274(n) with respect to expenses they incur in showcasing their entertainment product.

II. ALTERNATIVELY, THE SUBJECT EXPENSES ARE FULLY DEDUCTIBLE BECAUSE

(7) ITEMS AVAILABLE TO PUBLIC. Expenses for goods, services, and

[38] The Kentucky Derby and Breeders' Cup expenses at issue are part of the Petitioners' entertainment product. Respondent's Tech. Adv. Mem. 9641005 (October 11, 1996)(the "TAM") provides a good analysis of how the expenses of a taxpayer in the entertainment business should be treated under I.R.C. section 274. ⁶ Subsection (e)(7) of I.R.C. section 274 allows an exception for expenditures for goods, services, and facilities made available to the general public. In the TAM, Respondent advised that inside "comps" made by casinos are I.R.C. section 274(e)(7) items and thereby exempt from the fifty percent (50%) limitation of I.R.C. section 274(n). ⁷ In so doing, the TAM defines "available to the general public" in the following broad context:

[I]t has been argued that, because a customer must engage in

[40] The parties have stipulated that the events for which the subject expenses were incurred were part of the Kentucky Derby and the Breeders' Cup. These races, and the events held in conjunction with them, constitute a portion of Petitioner's entertainment product which is made available to and sold to the public. In the TAM, addressing the issue of casino "comps," Respondent advised that the fact that certain "comps" are offered only to a select group of the general public is irrelevant. Because the Petitioners' expenses are an integral part of an entertainment product "available to the public" and "sold to customers", they fall within subsections (e)(7) and (e)(8) to I.R.C. section 274 and are not subject to I.R.C. section 274(n)(1)'s fifty percent (50%) limitation on deductibility.

CONCLUSION

[41] For the foregoing reasons, Churchill Downs, Inc. and Subsidiaries respectfully request that this Court reverse the decision of the United States Tax Court.

Respectfully submitted,

[42] I certify that a copy of the foregoing was sent via First Class Mail, postage prepaid, on this 10th day of April, 2001, to: Karen D. Utiger, Esq., U.S. Department of Justice, Tax Division- Appellate Section, P.O. Box 502, Washington, D.C. 20044.

C. Tyson Gorman, One of Counsel for

[43] Pursuant to the Sixth Circuit Rule 30(b), Churchill Downs, Inc. and Subsidiaries hereby designate the following filings in the Tax Court as items to be included in the Joint Appendix:

DESCRIPTION OF ENTRY          RECORD NO.          FILE DATE

² Following all adjustments necessitated by Respondent's application of I.R.C. section 274(n)(1) to the expenses at issue, Petitioner's alleged deficiency for tax years 1994 and 1995 totals $51,872.00 and $20,658.00 respectively (R. 11 & 12, Agreed Computation & Tax Court Final Decision, JPX___).

³ Since the initiation of this action, Churchill Downs again served as the Breeders' Cup host in 2000.

⁴ A description of the competitive environment in which Petitioners operate is set in Exhibit 10-J of the Stipulation of Facts (R. 7, Stip. Ex. 10-J, JPX___).

⁵ A more detailed description of Petitioners' business in Exhibit 10-J of the Stipulation of Facts (R. 7, Stip. Ex. 10-J, JPX___).

⁶ The TAM is particularly relevant because it addresses treatment of expenses incurred by casinos, which are among ___). Petitioners' biggest competitors (R. 7, Stip. Ex. 10-J, JPX___). The TAM indicates Respondent's position regarding "comps" that are provided the best customers of casinos. If Petitioners are not allowed to similarly provide free events to customers who are critical to its business (i.e., the media, members of the horse industry, celebrities, and dignitaries), they will be placed at a competitive disadvantage. The individuals who attended the subject events are just as critical to the overall success and profitability of Petitioners' entertainment product as the "high rollers" are to the casinos' entertainment product. To treat those situations differently cannot be reconciled and results in an inequitable competitive advantage for casinos.

⁷ "[P]rivate rulings (known as Technical Advice Memoranda and Private Letter Rulings) have no precedential value, but they do reveal the interpretation put upon the statute by the agency . . . and may provide evidence of the proper construction of the statute." Wells Fargo & Co. v. C.I.R., 224 F.3d 874, 886 (8th Cir. 2000)(citations and quotation marks omitted). See also Comerica Bank, N.A. v. U.S., 93 F.3d 225, 230 (6th Cir. 1996)("While Private letter rulings are not binding authority, they may be cited as evidence of administrative interpretation.")

⁸ Petitioners' situation differs from the outside "comps" discussed in the TAM which were found to be subject to the I.R.C. section 274(n) limitation. The outside "comps" were costs that a casino paid to have their customers entertained at another casino or resort. Employees of the casino providing the "comps" were not present at the "comped" events -- their only involvement was to pay for the "comps" provided. Petitioners' costs are distinguishable from those of outside "comps" in that they were provided in the presence of Petitioners' employees and the parties have stipulated that those costs were incurred as part of the Kentucky Derby and the Breeders' Cup (R. 7, Stip. paragraphs 30, 31, 36, 40, JPX___).