The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit.

Question

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The phrase "ordinary and necessary" is used by the IRS to determine if a business expense can be deducted on a tax return. An expense is considered ordinary if it is common and accepted in the industry, and necessary if it is helpful or appropriate for generating income or operating the business. Therefore, an expense must be both appropriate and helpful for generating profit in order to be considered ordinary and necessary.

The Phrase "Ordinary and Necessary" Means That an Expense Must