- 26 -
B. Ordinary and Necessary
In Trust of Bingham v. Commissioner, 325 U.S. 365, 373-374
(1945), the Supreme Court described section 23(a)(2), I.R.C.
1939,6 as follows:
Section 23(a)(2) is comparable and in pari materia with
� 23(a)(1), authorizing the deduction of business or trade
expenses. Such expenses need not relate directly to the
production of income for the business. It is enough that
the expense, if “ordinary and necessary,” is directly
connected with or proximately results from the conduct of
the business. The effect of � 23(a)(2) was to provide for a
class of nonbusiness deductions coextensive with the
business deductions allowed by � 23(a)(1), except for the
fact that, since they were not incurred in connection with a
business, the section made it necessary that they be
incurred for the production of income or in the management
or conservation of property held for the production of
income. [Emphasis added; citations omitted.]
We have concluded supra that there is the necessary proximate
relationship between the Payments and petitioner’s efforts to
produce or collect income or to manage, conserve, or maintain her
income beneficiary interest.
We will not attempt to comprehensively summarize the
meanings of “ordinary” and “necessary” in the contexts of
sections 162(a) and 212. See Carbine v. Commissioner, 83 T.C.
356, 362-364 (1984), affd. 777 F.2d 662 (11th Cir. 1985).
Suffice it to observe that generally a taxpayer’s payment of a
6 The year before the Court in Trust of Bingham v.
Commissioner, 325 U.S. 365 (1945), was 1940. Sec. 23(a)(2),
I.R.C. 1939, was enacted in 1942; it applied to Trust of Bingham
because of the retroactive effective date of the 1942 enactment.
This is briefly described in Trust of Bingham v. Commissioner, 2
T.C. 853, 857-858 (1943), the Tax Court’s Court-reviewed opinion
that was affirmed by the Supreme Court.
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011