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INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). Section
162 generally allows a deduction for all the ordinary and
necessary expenses paid or incurred in carrying on any trade or
business. In order for petitioner to meet his burden of proof
under section 162(a), he must prove the item claimed as a
deductible business expense: (1) Was paid or incurred during the
taxable year; (2) was for carrying on his trade or business; (3)
was an expense; (4) was a necessary expense; and (5) was an
ordinary expense. See Commissioner v. Lincoln Savs. & Loan
Association., 403 U.S. 345, 352 (1971); Welch v. Helvering,
supra. The determination of whether an expenditure satisfies the
requirements of section 162 is a question of fact. Commissioner
v. Heininger, 320 U.S. 467, 475 (1943). On this record,
petitioner has failed to prove he is entitled to any business
deductions under section 162, and we so hold.7
Additions to Tax
Section 6651(a)(1) reads in pertinent part:
In case of failure * * * to file any return * * * on
the date prescribed therefor * * *, unless it is shown
that such failure is due to reasonable cause and not
due to wilful neglect, there shall be added to the
amount required to be shown as tax on such return 5
percent of the amount of such tax if the failure is for
7 The findings in Kersting (Consolidated Cases) that none of
the nominee corporations kept adequate books and records, and
that petitioner used the nominee corporations to pay his personal
living expenses render petitioner's claim to legitimate business
expenses particularly suspect.
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