Determining the deductibility of a trade or business expense has consistently remained one of the top ten most litigated issues before the U.S. Tax Courts and is important to businesses of all sizes. Under § 162 of the Internal Revenue Code (IRC), an expense is deductible if it is an ordinary and necessary one incurred in the carrying on of a trade or business.
Much litigation arises from these key elements, namely the expense's ordinariness and necessity, and also whether the taxpayer is engaged in a trade or business.
This primer focuses on the first two elements, ordinary and necessary, and explains how an expense may be deducted with regard to the applicable legal tests.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
