Business and Profit Seeking Expenses

These are the general requirements to qualify for a deduction for business and profit-seeking expenses:
1. the cost has to be an "expense"
2. the expense has to be "ordinary"
3. it has to be "necessary"
4. it has to be "paid or incurred during the taxable year" &
5. it has to be paid or incurred in "carrying on " a "trade or business."

What does "ordinary" mean? It means "customary or expected in the life of a business."

To determine if an expense is deductible, we need to perform the following analysis:
1. ascertain the purpose or motive of the taxpayer in making the payments and
2. determine whether there is a sufficient connection between the expenditures and the taxpayer's trade or business.

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