Internal Revenue Code section 162(a)
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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] If an expense is not deductible, then Congress considers the cost to be a consumption expense. Section 162(a) requires six different elements in order to claim a deduction. It must be an
- 1) ordinary
- 2) and necessary
- 3) expense
- 4) that was paid or incurred during the taxable year
- 5) in carrying on
- 6) a trade or business activity.[2]
These elements have been interpreted by the courts and administrative agencies to determine if an expenditure is deductible as a business expense.