- 16 -
legislative grace; Holland America bears the burden of
substantiating claimed deductions. See Rule 142(a); INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v. Helvering,
290 U.S. 111 (1933).
In order for Holland America to meet its burden of proof, it
must prove that the expenses deducted (1) were paid or incurred
during the taxable year, (2) were incurred to carry on its trade
or business, and (3) were ordinary and necessary expenditures of
the business. See sec. 162(a); Commissioner v. Lincoln Sav. &
Loan Association, 403 U.S. 345, 352 (1971). An expense is
ordinary if it is customary or usual within a particular trade,
business, or industry or relates to a transaction “of common or
frequent occurrence in the type of business involved.” Deputy v.
du Pont, 308 U.S. 488, 495 (1940). An expense is necessary if it
is appropriate and helpful for the development of the business.
See Commissioner v. Heininger, 320 U.S. 467, 471 (1943).
Personal, living, or family expenses are not deductible. See
sec. 262(a).
We hold that none of the expenses in dispute, except the
cost of the golf clubs, was properly deducted under section
162(a). Our reasons are set forth below.
A. In General
Petitioners adamantly asserted an aggressive and
nondiscerning position regarding the disputed expenses deducted
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011