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1993, Mr. and Mrs. Thorpe made a check payable to ETCO in the
amount of $5,334 for their personal use of the automobiles.
OPINION
Deductions for Travel to Conventions and Auto Expenses
In the notice of deficiency issued to ETCO, respondent
disallowed ETCO's deductions for travel and entertainment
expenses, which were incurred by Mrs. Thorpe during her
attendance at various conventions on behalf of ETCO. Respondent
also disallowed ETCO's deductions for expenses related to the
leased automobiles. Respondent disallowed the travel and auto
expenses on the bases that ETCO failed to establish that there
was a business purpose for the expenses and, further, that it
failed to substantiate some of the claimed expenses in accordance
with sections 162, 262, and 274(d). ETCO, on the other hand,
contends that it is entitled to deduct all the claimed expenses.
Section 162(a) provides that "There shall be allowed as a
deduction all the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business". To be "necessary" an expense needs to be "appropriate
and helpful" to the taxpayer's business. Welch v. Helvering, 290
U.S. 111, 113 (1933). For an expense to be "ordinary", "the
transaction which gives rise to it must be of common or frequent
occurrence in the type of business involved". Deputy v. du Pont,
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Last modified: May 25, 2011