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personal expenditures and not ordinary and necessary costs of
doing business.
Discussion
Section 162(a) allows a deduction for all ordinary and
necessary expenses incurred in carrying on a trade or business.
The performance of services as an employee constitutes a trade or
business. O’Malley v. Commissioner, 91 T.C. 352, 363-364 (1988).
An ordinary expense is one that is common and acceptable in the
particular business. Welch v. Helvering, 290 U.S. 111, 113-114
(1933). A necessary expense is an expense that is appropriate
and helpful in carrying on the trade or business. Heineman v.
Commissioner, 82 T.C. 538, 543 (1984). An employee’s trade or
business is earning his compensation, and generally only those
expenses that are related to the continuation of his employment
are deductible. Noland v. Commissioner, 269 F.2d 108, 111 (4th
Cir. 1959), affg. T.C. Memo. 1958-60. Section 262 disallows
deductions for personal, living, or family expenses.
When an employee has a right to reimbursement for
expenditures related to his status as an employee but fails to
claim such reimbursement, the expenses are not deductible because
they are not “necessary”; i.e., it is not necessary for an
employee to remain unreimbursed for expenses to the extent he
could have been reimbursed. Orvis v. Commissioner, 788 F.2d
1406, 1408 (9th Cir. 1986), affg. T.C. Memo. 1984-533; Lucas v.
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Last modified: May 25, 2011