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E. Consulting Fees
The deductibility of the consulting fees is not a section
6038A issue since it does not involve a transaction with a
foreign related party; the consulting payments were made by
petitioner to Worltek, a domestic corporation that was not
related to petitioner at the time. The parties presented
evidence on the consulting fee issue and argued it on brief.
Therefore, we shall decide the issue. See Rule 41(b).
Deductions are a matter of legislative grace; petitioner has
the burden of showing that it is entitled to any deduction
claimed. Rule 142(a); New Colonial Ice Co. v. Helvering, 292
U.S. 435, 440 (1934). To be entitled to a business expense
deduction for consulting fees under section 162, petitioner must
prove that the expenses were: (1) Ordinary and necessary, (2)
paid or incurred in carrying on a trade or business, (3) incurred
during the taxable year in which the taxpayer seeks to deduct
them, and (4) paid by the person to whom the services were
rendered. Sec. 162(a).
Respondent argues that the consulting expenses were the
expenses of ASAT, Ltd. or QPL, and thus not deductible by
petitioner. We need not decide the issue on that ground as
petitioner has failed to show that the consulting fee expense was
ordinary and necessary. Whether an expenditure is ordinary and
necessary is generally a question to fact. Commissioner v.
Heininger, 320 U.S. 467, 475 (1943). To be "necessary" within
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