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and therefore are not deductible. Sec. 1.262-1(a), Income Tax
Regs.
Issue 3. Schedule C Deductions
Respondent determined that all of petitioner's Schedule C
deductions for 1991 and 1992 are disallowed, because he failed to
meet the requirements of sections 162 and 274. Petitioner
asserts that each of the Schedule C deductions claimed for his
business was an ordinary and necessary expense paid or incurred
during the taxable years in issue within the meaning of section
162 and section 1.162-1(a), Income Tax Regs., and that each of
these deductions has been sufficiently substantiated pursuant to
sections 162 and 274, both through his oral testimony and the
documentary evidence presented at trial.
A taxpayer can deduct all the ordinary and necessary
expenses paid or incurred during the taxable year in carrying on
a trade or business. See supra p. 7. An expense is ordinary if
it is "normal, usual, or customary" in the taxpayer's trade or
business. Deputy v. du Pont, 308 U.S. 488, 495 (1940) (citing
Welch v. Helvering, 290 U.S. at 114). An expense is "necessary"
if it is "appropriate and helpful" to the development and
operation of the taxpayer's business. Welch v. Helvering, supra
at 113. In determining whether an expense is ordinary and
necessary pursuant to section 162, we generally have focused on
the existence of a reasonably proximate relationship between the
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