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

Question

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

Quizplus · Accepted Answer

The concept of "ordinary and necessary" is a key criteria used by the IRS to determine whether a business expense is eligible for tax deductions. An expense is ordinary if it is common and accepted in the trade or business. An expense is necessary if it is helpful and appropriate in the context of the trade or business being conducted. For an expense to be deductible, it must satisfy both the "ordinary" and "necessary" tests. Ultimately, the goal of this criteria is to ensure that deductions are only claimed for legitimate business expenses that actually contributed to the generation of income.

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