Ordinary and Necessary Business Expenses

Tax term that allows a current deduction for business expenses; contrasted with Capital Expenditure and unreasonable expense. An ordinary and necessary business expense of a sole proprietor would appear on Schedule C of Form 1040.

A tax term that allows a current deduction for business expenses. Contrasted with Capital Expenditures and unreasonable expenses.
Example: Each day the apartment manager enjoyed a 3-martini lunch with his friend. He claimed a tax deduction for the lunch expense. The Internal Revenue Service contested the deductions because they were not ordinary and necessary business expenses.