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deductions at issue.18
Section 162(a) generally allows a deduction for ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business. The determination of whether
an expense satisfies the requirements for deductibility under
that section is a question of fact. Commissioner v. Heininger,
320 U.S. 467, 475 (1943); Hearn v. Commissioner, 309 F.2d 431
(9th Cir. 1962), affg. 36 T.C. 672 (1961).
In general, an expense is ordinary if it is considered
normal, usual, or customary in the context of the particular
business out of which it arose. Deputy v. du Pont, 308 U.S. 488,
495-496 (1940). In general, an expense is necessary if it is
appropriate and helpful to the taxpayer’s trade or business.
Commissioner v. Tellier, 383 U.S. 687, 689 (1966); Carbine v.
Commissioner, 83 T.C. 356, 363 (1984), affd. 777 F.2d 662 (11th
Cir. 1985).
In determining whether an expense is ordinary and necessary
18The respective amounts of advertising and/or promotional
expense deductions that respondent allowed Mr. Hopkins’s sole
proprietorship and Mr. Hopkins’s S Corporation were calculated as
approximately 4 percent of the respective gross receipts of those
businesses. We reject any suggestion by respondent that approxi-
mately 4 percent of the gross receipts of a taxpayer’s business
is the standard to be used in deciding whether the amount of an
advertising or promotional expenditure is reasonable under sec.
162(a). We have previously indicated that “we did not intend to
create a rule of thumb for determining whether a certain level of
expenditure was reasonable or unreasonable” under that section.
Gill v. Commissioner, T.C. Memo. 1994-92, affd. without published
opinion 76 F.3d 378 (6th Cir. 1996).
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