[Verse 1] Section one-six-two holds the golden key Business expenses must be ordinary Welch versus Helvering taught us well "Ordinary" means what others in your field would tell Not unique or rare, but common to the trade That's how proper deductions get made [Chorus] Ordinary and necessary, that's the test Capitalize the long-term, deduct the rest INDOPCO doctrine draws the line so clear Between the assets lasting year to year Trade or business, keep your records straight Section one-six-two will validate [Verse 2] When expenses help you more than just today Capitalization is the only way Tangible property regs define the rules Buildings, equipment are capital tools But office supplies and monthly rent Current deductions, your money well spent [Chorus] Ordinary and necessary, that's the test Capitalize the long-term, deduct the rest INDOPCO doctrine draws the line so clear Between the assets lasting year to year Trade or business, keep your records straight Section one-six-two will validate [Verse 3] Reasonable compensation's what you pay To officers and shareholders each day If it's too high, the IRS will say "That's dividends in disguise today" Market rates determine what's fair Excessive amounts won't get you there [Bridge] Business meals are fifty percent allowed Entertainment deductions aren't endowed Since Tax Cuts and Jobs Act came around Zero entertainment can be found Home office needs exclusive use Regular business, not obtuse [Chorus] Ordinary and necessary, that's the test Capitalize the long-term, deduct the rest INDOPCO doctrine draws the line so clear Between the assets lasting year to year Trade or business, keep your records straight Section one-six-two will validate [Outro] From Welch to INDOPCO's name Tax law's deduction rules remain Ordinary, necessary, reasonable too Business expenses coming through
← 4 Nonrecognition Transactions | 2 Depreciation and Cost Recovery →