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amount of the deductions. See sec. 6001; sec. 1.6001-1(a),
Income Tax Regs.
Section 162(a) requires a taxpayer to prove that the
expenses deducted (1) were paid or incurred during the taxable
year, (2) were incurred to carry on the taxpayer’s trade or
business, and (3) were ordinary and necessary expenditures of the
business. See also 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). Even if an
expense is ordinary and necessary, however, the expense is
deductible only to the extent that it is reasonable in amount.
See United States v. Haskell Engg. & Supply Co., 380 F.2d 786,
788-789 (9th Cir. 1967); Ciaravella v. Commissioner, T.C. Memo.
1998-31. In general, a taxpayer who pays another taxpayer’s
business expenses may not treat those payments as ordinary and
necessary expenses incurred in the payor’s business. See
Columbian Rope Co. v. Commissioner, 42 T.C. 800, 815 (1964); see
also Interstate Transit Lines v. Commissioner, 319 U.S. 590
(1943); Deputy v. du Pont, supra at 495; S. Am. Gold & Platinum
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