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.
Access the Primer
