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tion claimed. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84
(1992). A taxpayer is required to maintain records sufficient to
establish the amount of any deduction claimed. Sec. 6001; sec.
1.6001-1(a), Income Tax Regs.
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.6 The determination of whether
an expenditure satisfies the requirements for deductibility under
section 162 is a question of fact. See Commissioner v.
Heininger, 320 U.S. 467, 475 (1943). 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. See
Deputy v. du Pont, 308 U.S. 488, 495 (1940). Ordinarily, an
expense is necessary if it is appropriate and helpful to the
operation of the taxpayer’s trade or business. See 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).
For certain kinds of expenses otherwise deductible under
section 162(a), such as business expenses relating to “listed
6If it is established that a taxpayer paid or incurred
ordinary and necessary expenses in carrying on a trade or busi-
ness and if sec. 274 does not apply to such expenses, we are
generally permitted to estimate the amount of deductible expenses
if we are convinced from the record that such expenses were paid
or incurred by the taxpayer and that we have a basis upon which
to make such an estimate. Cohan v. Commissioner, 39 F.2d 540,
544 (2d Cir. 1930).
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Last modified: November 10, 2007