It must be an These elements have been interpreted by the courts and administrative agencies to determine if an expenditure is deductible as a business expense.
[3] For example, in Welch v. Helvering, the United States Supreme Court found that payments must be both ordinary and necessary to be business expenses; it held that although payments made to a creditor by a taxpayer may have been necessary, they were not ordinary because the circumstances under which they were paid were outside the norms of conduct in society.
The Welch case is frequently cited for its dictum describing the meaning of the term "necessary" in Section 162 as requiring that expenses merely be "appropriate and helpful [in] the development of the [taxpayer's] business.
The United States Supreme Court held that "to be engaged in a trade or business, the taxpayer must be involved in the activity with continuity and regularity and that the taxpayer's primary purpose for engaging in the activity must be for income or profit.
[13] More information can be found on how to determine if the taxpayer's expenditures are for carrying on his trade or business by examining Treasury Regulation 1.183-2.
[15] The cost to keep a jet on 24-hour standby for business needs was found deductible in Palo Alto Town & Country Village, Inc. v.
[16] By contrast the purchase of a new computer for a business would not be a deductible expense; instead, because a computer is an asset, the cost incurred would be capitalized and then deducted over a period of years as depreciation expense, unless a special election (such as a section 179 election) is made.