Kelvin & Arlene Jackson - Page 11




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               Pursuant to section 162(a), a taxpayer is entitled to deduct           
          all of the ordinary and necessary business expenses paid or                 
          incurred during the taxable year in carrying on a trade or                  
          business.  The taxpayer bears the burden of proving that the                
          expenses were ordinary and necessary according to section 162.              
          In certain circumstances, the taxpayer must meet specific                   
          substantiation requirements in addition to section 162.  See sec.           
          274.                                                                        
               To be “ordinary” the transaction which gives rise to the               
          expense must be of a common or frequent occurrence in the type of           
          business involved.  Deputy v. Dupont, 308 U.S. 488, 495 (1940).             
          To be “necessary” an expense must be “appropriate and helpful” to           
          the taxpayer’s business.  Welch v. Helvering, supra at 113.                 
          Additionally, the expenditure must be “directly connected with or           
          pertaining to the taxpayer’s trade or business”.  Sec. 1.162-               
          1(a), Income Tax Regs.                                                      
               Generally, a claimed expense (other than those subjected to            
          heightened scrutiny under section 274) may be deductible even               
          where the taxpayer is unable to fully substantiate it, if there             
          is an evidentiary basis for doing so.  Cohan v. Commissioner, 39            
          F.2d 540, 543-544 (2d Cir. 1930); Vanicek v. Commissioner, 85               
          T.C. 731, 742-743 (1985); Sanford v. Commissioner, 50 T.C. 823,             
          827-828 (1968), affd. per curiam 412 F.2d 201 (2d Cir. 1969);               
          sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014            







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