Question

Discuss geographic impact on ordinary, necessary and reasonable in business expenses deduction.

Answer 1

Ordinary expenses: These are the expenses which are ordinary in a particular geogrpahich location and all the trade and businesses incur it to run the business. Example can be having a security guard because the area is threatned by bandits

Necessary: Necessary expenses are not deductible unless they are also ordinary. These are the one which are helpful and appropriate to run the business in an area. Example, advertising in newspaper and radio of the local area

Reasonable: If ordinary and necessary expesnes are not reasonable than they would not be allowed. Cost incurred should not exceed the general limits and be under the means and limits of the business with explanation as to why it is incurred.