All of the business travel is assumed to be ordinary and necessary
and the accountable plan rules are assumed to be met.
On those returns the firm deducted as an ordinary and necessary
business expense litigation costs of $705,647 and $629,834 it had paid on behalf of contingent lee clients whose matters had not been resolved by yearend.
One of the reasons that TEI filed an amicus brief in INDOPCO back in 1991 was to express concern over the possible breadth of the Third Circuit's decision in the case: "If the Third Circuit's definition of a capital expenditure as any expenditure yielding income substantially beyond the taxable year gains currency," the Institute wrote, "then the manifest deductibility of untold ordinary and necessary
expenses will be jeopardized.
However, the courts have been much more expansive in their interpretation of the ordinary and necessary
Companies can deduct travel expenses while employees are working away from home in the pursuit of a trade or business as ordinary and necessary
expenses under IRC section 162(a).
Furthermore, National Starch argued that Lincoln Savings specifically rejected looking to the presence of a future benefit to determine whether expenditures were ordinary and necessary
162 provides for the deduction of ordinary and necessary
expenses incurred by a trade or business.
At trial the Tax Court noted that, as a general rule, "a taxpayer may not deduct a payment made on another's behalf unless the payment represents an ordinary and necessary
expense of the taxpayer's own business, as distinct from the business of another person or of some other entity in which the taxpayer may have an ownership interest.
One recurring source of that friction is the requirement that proper distinctions be drawn between capital expenditures and deductible ordinary and necessary
162(a) as an ordinary and necessary
expense, the Court said:
IRC section 162 allows companies to deduct all ordinary and necessary
expenses paid or incurred during the tax year in carrying on a trade or business.
As a result, we believe the ruling's conclusion is erroneous; machinery reconfiguration costs to accommodate just-in-time techniques are deductible as ordinary and necessary