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or business, including a reasonable allowance for salaries or
other compensation for personal services actually rendered. Sec.
162(a)(1). An expense is considered “ordinary” if commonly or
frequently incurred in the trade or business of the taxpayer.
Deputy v. du Pont, 308 U.S. 488, 495-496 (1940). An expense is
“necessary” if it is appropriate or helpful in carrying on a
taxpayer’s trade or business. Commissioner v. Heininger, 320
U.S. 467, 475 (1943); Welch v. Helvering, 290 U.S. at 113.
Ordinary and necessary business expenses include payments to
employees for sickness, hospitalization, medical expense, or a
similar benefit plan. Secs. 162(a), 213(a); sec. 1.162-10(a),
Income Tax Regs. The test for deductibility in the case of
compensation payments is whether they are reasonable in amount
and are in fact payments purely for services. See Cardwell v.
Commissioner, T.C. Memo. 1982-453 (citing United States v. Haskel
Engg. & Supply Co., 380 F.2d 786, 788 (9th Cir. 1967)); sec.
1.162-7(a), Income Tax Regs. Expenses must also be directly or
proximately related to the taxpayer’s trade or business. Deputy
v. du Pont, supra at 494-495; sec. 1.162-1, Income Tax Regs.
While taxpayers may generally deduct ordinary and necessary
expenses paid or incurred in carrying on a trade or business,
taxpayers may not deduct personal, living, or family expenses.
See secs. 162(a), 262; see also Feldman v. Commissioner, 86 T.C.
458, 464 (1986); Sharon v. Commissioner, 66 T.C. 515, 522-525
(1976), affd. 591 F.2d 1273, 1275 (9th Cir. 1978). Moreover,
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