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expenditure which is amortized or depreciated over time. See id.
at 83-84.
Section 162(a) allows as a deduction all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business. Conversely, section 262(a)
disallows any deduction, except as otherwise expressly provided
in the Code, for personal, living, or family expenses. And,
section 263(a) disallows a current deduction for any capital
expenditure; i.e., an amount paid out for new buildings or for
permanent improvements or betterments made to increase the value
of any property or estate. See id. To qualify for a 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). We are primarily
concerned here with the second requirement; i.e., whether
petitioner incurred the expenses while carrying on a trade or
business.
“[T]o be engaged in a trade or business, the taxpayer must
be involved in the activity with continuity and regularity and
that the taxpayer’s primary purpose for engaging in the activity
must be for income or profit. A sporadic activity, a hobby, or
an amusement diversion does not qualify.” Commissioner v.
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