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We turn to the nine issues for decision and address each of
these issues seriatim.
1. Contributions to the Neonatology and Lakewood Plans
We decide first the question of whether section 162(a)
allows Neonatology and Lakewood to deduct their contributions to
their plans. Section 162(a) generally provides a deduction for
all ordinary and necessary expenses paid or incurred during the
taxable year in carrying on a trade or business. A taxpayer must
meet five requirements in order to deduct an item under this
section. The taxpayer must prove that the item claimed as a
deductible business expense: (1) Was paid or incurred during the
taxable year; (2) was for carrying on his, her, or its 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,
290 U.S. 111, 115 (1933). A determination of whether an
expenditure satisfies each of these requirements is a question of
fact. See Commissioner v. Heininger, 320 U.S. 467, 475 (1943).
Petitioners argue that Neonatology and Lakewood meet all
five requirements with respect to their contributions to their
plans, and, hence, petitioners assert, those contributions are
fully deductible under section 162(a). Petitioners contend that
the contributions were paid as compensation because, they assert,
the contributions funded a fringe benefit in the form of term
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