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persons fined was issued weekly. The following table summarizes
the number of disciplinary actions taken pursuant to the rules of
the CME during the years indicated in which monetary sanctions
were imposed:
Actions Involving
Year Actions Pre-Arranged Trading
1987 76 17
1988 141 15
1989 139 21
The parties stipulated that the fine paid by petitioner was
not a capital expenditure within the meaning of section 263.
OPINION
In the instant case, we must decide whether the fine paid by
petitioner to the CME is deductible as an ordinary and necessary
business expense pursuant to section 162(a). To qualify as an
allowable deduction pursuant to section 162(a), an item must be:
(1) Paid or incurred during the taxable year; (2) for carrying on
any trade or business; (3) an expense; (4) ordinary; and (5)
necessary. Commissioner v. Lincoln Sav. & Loan Association, 403
U.S. 345, 352 (1971). Respondent concedes that petitioner's
payment of the CME fine satisfies the first three requirements
set forth in Lincoln Savings. Considering respondent's
concession and the record in the instant case, we view the
disciplinary proceedings against petitioner as having arisen out
of petitioner's trade or business of acting as a floor broker and
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