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companies should be included in the gross income of the
dealerships, but rather whether the dealerships are entitled to
deduct under section 162(a) the commissions that they paid to
their managers for selling credit insurance.
The Government urges us to decide in its favor on the ground
that the compensation (or commissions) paid to the dealerships'
managers for selling the credit insurance is not deductible under
section 162(a) as claimed by petitioners. In that posture of the
case, we hold for petitioners that such compensation (or
commissions) is deductible as a business expense under section
162(a).
Section 162(a) allows "as a deduction all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business". An ordinary expense is one
that is "normal, usual, or customary" in a particular business,
even if it occurs only once. Deputy v. du Pont, 308 U.S. 488,
495 (1940). "One of the extremely relevant circumstances is the
nature and scope of the particular business out of which the
expense in question accrued." Id. at 496. A necessary expense
is one that is "appropriate and helpful." Welch v. Helvering,
290 U.S. 111, 113 (1933). Whether the expense meets the
4(...continued)
they paid to the dealer-related agencies; and (2) commissions
paid by the dealerships to their managers for their role in the
sale of insurance.
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