Statutory Requirements for Business Deductions:
i. Code :162(a); 212; 262; 263(a); 263A(a)-(c), (h)
ii. Reg: 1.162-1(a); 1.162-4; 1.262-1(a), (b); 1.263(a)-1(a), (b); 1.263(a)-2
iii. 162 authorizes the deduction of “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. This is the “mother of all deductions.”
1. this is the big net that is cast out to the business end, yet excluding the personal
2. 162 applies three criteria for deductibility:
a. the item must be ordinary and necessary,
b. the item must be incurred in a trade or business, &
c. the item must be an expense rather than a capital expenditure
i. this is very important, the distinction b/w an expense and a capital expenditure!
iv. 162(c): illegal bribes, kickbacks and other payments are codified b/c they are against public policy
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