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Dolphin's corporate treasurer, prepared the Icarus consolidated
returns for the years in issue.
OPINION
1. Icarus Deductions
Section 162 generally allows a deduction for ordinary and
necessary business expenses. Whether an expense is deductible
under section 162 is ultimately a question of fact. Commissioner
v. Heininger, 320 U.S. 467, 475 (1943). Generally, an expense is
ordinary under section 162, if it bears a reasonably proximate
relationship to the operation of the taxpayer's business. Deputy
v. du Pont, 308 U.S. 488, 495-496 (1940); Gill v. Commissioner,
T.C. Memo. 1994-92, affd. without published opinion 76 F.3d 378
(6th Cir. 1996). Generally, an expense is necessary if it is
helpful and appropriate in promoting and maintaining the
taxpayer's business. Carbine v. Commissioner, 83 T.C. 356, 363
(1984), affd. 777 F.2d 662 (11th Cir. 1985); Gill v.
Commissioner, supra.
Even if an expense is ordinary and necessary, it is
deductible under section 162 only to the extent it is reasonable
in amount. United States v. Haskel Engg. & Supply Co., 380 F.2d
786, 788-789 (9th Cir. 1967); Gill v. Commissioner, supra;
Brallier v. Commissioner, T.C. Memo. 1986-42. The element of
reasonableness is inherent in the phrase "ordinary and necessary"
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