Prove It and You're O.K.

The U.S. has developed a new kind of class division that Karl Marx never conceived of--people with expense accounts v. people without them. And as that Great Leveler, the Internal Revenue Service, is busy blurring this distinction between haves and havenots, predictable cries of pain are being raised throughout the land.

When IRS Head Mortimer Caplin announced last December that all expense account expenditures over $25 must be supported by "documentary evidence." restaurateurs responded with a flurry of gimmickry. Some offered Polaroid photos of diners at work, others provided tape recorders to prove people were talking business. Many listed prix fixe meals (with drinks) at $24.95. But today, while the last of the big spenders huddle over their $1.50 martinis among empty tables, the gimmicks have given way to groans.

Drinking at Home. "I'll be damned if we're not selling more ashtrays than drinks." says white-haired Sherman Billingsley, owner of Manhattan's Stork Club, where business is off 35% and the waiters have just taken a 15% cut in pay. Among expense-accounters who still turn out, Billingsley professes to see a loss of morale and to hear talk of cutting maids from six days to three, and wearing colored shirts ("You can wear them for two days instead of one"). He is also plagued by chiselers begging for blank customer receipts, the post-Caplin equivalent of a blank check.

Manhattan is full of blues in the night. Toots Shor, contemplating the thinned-out ranks at his bar, says ruefully: ''We're getting re-educated for drinking at home." Proprietor Billy Reed of the

Little Club says his business is off 35% since January, and "I've added 20% to the unemployment problem since Caplin with his little guillotine." The Colony has cut ten men from its 100-man staff; Maud Chez Elle has cut its staff from 40 to 34 to help compensate for a close to 50% drop in business. "If business doesn't pick up soon," says Vincent Sardi Jr.. owner of Manhattan's Sardi's and Sardi's East, "all of us will be in real trouble."

Moans Owner Henri Soule of the sumptuous Le Pavilion: "We cannot survive."

Killing the Splendor. The same sad sounds are heard from other voices, other rooms. Ray Castro, owner of four top Chicago restaurants (Jacques, Maison Lafite, Cafe de Paris, La Maisonette), has canceled plans to open a $150,000 supper club, says that the decline in his business during the past three months means that he will pay $21,000 less in taxes and his employees will get considerably reduced bonuses. In Detroit's fanciest restaurants, the London Chop House and the Caucus Club, business is off about 25%, and the entertainment has been reduced accordingly. At Trader Vic's in San Francisco, says Manager Rainer G. Baldauf, "two well-heeled customers are coming in where there used to be four, and four where there used to be six. I think this law is going to kill splendor in dining." Expense-accounters often ask for separate checks for liquor and food to keep both under $25; others put $24.50 of a $28 bill on their credit card and pay the rest in cash in order not to attract the attention of the IRS.

The Boy-Girl Trade. The new rules are also playing hob with the hotels' convention business: at a recent convention in Los Angeles' Statler Hilton. 500 rooms were reserved, but fewer than 100 were actually rented. Wives who used to go along are staying home--a factor largely-responsible for a 40% drop from last year in a recent convention of civil engineers in Atlanta. In the matter of wives, hotelmen are fond of pointing to President Kennedy's extensive use of his Jacqueline as a diplomatic asset.

Treasury Secretary Douglas Dillon told the Magazine Publishers Association in Washington that a Department of Commerce survey showed no cause for alarm; food sales in hotel restaurants dropped only 3% in January-February, and beverage sales were off only 2%. On the other hand, the National Restaurant Association, by limiting its study to 387 "known expense-account restaurants in 40 major cities," finds that sales declined an average 16.4% during the same period.

Deductible Yachts. Last week Mortimer Caplin issued a spell-out of the new rules and regulations that brought the temperature down a few degrees. Provided that the eating and drinking takes place in an atmosphere "conducive to a business discussion," said Caplin, "business need not actually be discussed." If the wives want to come along, that's

O.K. too. And even a girlie show may be written off, "provided it is directly preceding or following a substantial and bona fide business discussion."

Travel expenses are untouched. If a man goes to London on business and on to the Continent for a vacation, he is still entitled to write off the round-trip fare to London. Even yachts, hunting lodges and country-club dues may be deducted, said Caplin, if it can be established that at least 50% of their use is for business entertaining. Then the deduction would have to be prorated--when both business associates and personal friends are invited to a party, only the cost of the business guests is deductible.

The real crunch remains the matter of substantiation. Last year if a man's expenses were questioned, a skeptical auditor was usually willing to allow him part of his claim. This year the burden of proof lies on the taxpayer. If he is caught cheating, he can be sued for fraud.

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