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v. Commissioner, supra at 83-84, explained:
The primary effect of characterizing a payment as
either a business expense or a capital expenditure
concerns the timing of the taxpayer's cost recovery:
While business expenses are currently deductible, a
capital expenditure usually is amortized and
depreciated over the life of the relevant asset, or,
where no specific asset or useful life can be
ascertained, is deducted upon dissolution of the
enterprise. * * * Through provisions such as these, the
Code endeavors to match expenses with the revenues of
the taxable period to which they are properly
attributable, thereby resulting in a more accurate
calculation of net income for tax purposes. * * *
To qualify as an allowable deduction under section 162(a),
an item must (1) be paid or incurred during the taxable year, (2)
be for carrying on any trade or business, (3) be an expense, (4)
be a necessary expense, and (5) be an ordinary expense.
Commissioner v. Lincoln Sav. & Loan Association, 403 U.S. 345,
352 (1971). Respondent argues that the legal fees were neither
“ordinary” nor “for carrying on any trade or business” but were
expenditures associated with the acquisition of a capital asset.
In one sense, the term “ordinary” in section 162 prevents
the deduction of expenses that are not normally incurred in the
type of business in which the taxpayer is engaged (“ordinary” in
the sense of “normal, usual, or customary” in a taxpayer’s trade
or business). Deputy v. Du Pont, 308 U.S. 488, 495 (1940). More
importantly, the term “ordinary” serves as a means to “clarify
the distinction, often difficult, between those expenses that are
currently deductible and those that are in the nature of capital
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