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monetary sanctions in connection with those charges, occurred
frequently. From 1987 through 1989, the CME undertook 356
disciplinary proceedings pursuant to which monetary sanctions
were imposed, and 53 of those actions involved pre-arranged
trading, an offense in connection with which petitioner paid his
fine. Moreover, the parties have stipulated that, during
relevant periods, other securities and commodities exchanges
imposed monetary sanctions on their members for alleged
violations of their rules several hundred times per year. Such
facts indicate that payments of fines pursuant to disciplinary
proceedings by securities and commodities exchanges were a common
and frequent occurrence in the type of business in which
petitioner was engaged.2 Accordingly, we conclude that
petitioner's payment of the CME fine was an ordinary expense of
petitioner's business.
We further conclude that payment of the CME fine was
"necessary" within the meaning of the statute. By settling the
disciplinary proceedings against him, petitioner avoided any
further expense and risk associated with continuation of the
2 Respondent contends that a large number of the disciplinary
actions of the CME involved violations of "housekeeping rules",
such as prohibitions on improper dress, spitting, or fighting.
We, however, have rejected the suggestion that a certain
percentage of an industry must pay or incur an expense in order
for it to be ordinary, and the question depends on the facts and
circumstances of each case. Brizell v. Commissioner, 93 T.C.
151, 158-159 (1989). We also reject respondent's attempt to
narrow the type of conduct in the business community of which
petitioner was a part that is to be considered in deciding
whether payment of the fine in question was ordinary.
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