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Section 162(a) of the Internal Revenue Code allows for taxpayers to deduct from their gross income [1] ordinary and necessary expenses paid or incurred in carrying on a trade or business. Taxpayers seeking to minimize the size of their gross income for tax purposes have a strong incentive to deduct as much as possible from their pre-tax income.
In Jenkins v.Commissioner, T.C. Memo 1983-667 (U.S. Tax Court Memos 1983), [1] the U.S. Tax Court held that the payments Conway Twitty, a country singer, made to investors in a defunct restaurant business known as "Twitty Burger, Inc." were deductible under § 162 of the Internal Revenue Code [2] as ordinary and necessary business expenses of petitioner's business as a country music performer.
Section 162(a) of the Internal Revenue Code (26 U.S.C. § 162(a)), is part of United States taxation law. It concerns deductions for business expenses. It is one of the most important provisions in the Code, because it is the most widely used authority for deductions. [ 1 ]
Treasury Regulation 1.183-2 is a Treasury Regulation in the United States, outlining the taxes owed from income deriving from non-business, non-investment activity.. Expenses relating to for profit activities, such as business and investment activities, are generally tax deductible under sections 162 and 212, respectively, of the Internal Revenue
[1] [2] Under the terms of § 162(a), tax deductions should be granted "for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business for tax purposes." [3] However, the term "trade or Business" is not defined anywhere in the Internal Revenue Code. [4] The case of Commissioner v.
Estate of Rockefeller v. Commissioner, 762 F.2d 264 (2d Cir. 1985), [1] was a case in which the United States Court of Appeals for the Second Circuit held that section 162(a) of the Internal Revenue Code only allows deductions against income for expenses that occur while carrying on a trade or business.
Grynberg v. Commissioner, 83 T.C. 255 (1984) [1] was a case in which the United States Tax Court held that one taxpayer's prepaid business expenses were not ordinary and necessary expenses of the years in which they were made, and therefore the prepayments were not tax deductible.
Internal Revenue Code, 26 U.S.C. § 162 Correll , 389 U.S. 299 (1967), is a case in which the United States Supreme Court ruled 5-3 that in order for the taxpayer to be allowed to deduct the cost of his meals incurred while on a business trip, the trip must have required him to stop for sleep or rest.