What business expenses are deductible under Section 162?
Under Section 162(a) of the Internal Revenue Code, a business may deduct all the ordinary and necessary expenses it pays or incurs during the year in carrying on a trade or business. The deduction reaches the cost of running the business, not the capital cost of acquiring long-lived assets.
The answer
The rule
26 U.S.C. § 162(a) allows a deduction for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. The statute lists examples: a reasonable allowance for salaries, traveling expenses while away from home for business, and rentals for property used in the business.
Ordinary and necessary
An expense is “ordinary” if it is common and accepted in the taxpayer’s line of business, and “necessary” if it is appropriate and helpful to the business. Section 162(a) is the operative grant of the deduction; the limits and carve-outs sit in the rest of section 162 and in surrounding provisions.
The judged input
What the AI drafted
Submitted to the judgeThis is the kind of answer a cloud legal AI returns for the question above. Kingsfield does not write it — it rules on the citations the model put in it. This draft cites two authorities; one of them is wrong.
The judge ruled on every citation as the draft used it — it accepted 26 U.S.C. § 162(a) and rejected 26 U.S.C. § 263(a). Here is why.
The verdict
How Kingsfield ruled
Ruled 2026-06-23Each citation in the draft above was submitted to the Kingsfield judge and ruled against the primary-law corpus — Accept, Reject, or Inconclusive, per citation. These are live verdicts, not editorial. Each card shows the claim the draft made and the verbatim authority the verdict was rendered against.
The draft claimed: A business may deduct all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.
“§ 162 Trade or business expenses. (a) In general. There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including— (1) a reasonable allowance for salaries or other compensation for personal services actually rendered; (2) traveling expenses… while away from home in the pursuit of a trade or business…”
Cite found; proposition supported by the cited text.
The draft claimed: Section 263 allows a current deduction for the ordinary and necessary expenses of carrying on a trade or business.
Cite found, but the cited text does not support the proposition. 26 U.S.C. 263 is the capital-expenditures rule, which denies a current deduction for amounts paid to acquire or improve property; the ordinary-and-necessary deduction is at 26 U.S.C. 162. Regenerate with the correct authority.
Run your own work through the judge
Kingsfield rules on every citation, quote, and proposition your AI produces, against the primary law we cover. Accept, Reject, or Inconclusive, per citation, with a signed Audit Capsule.
Connect the Judge See the architectureThis page is legal information, not legal advice, and does not create an attorney-client relationship. The draft shown is an illustration of a typical AI answer; verdicts reflect the cited authority in the Kingsfield corpus as of the ruling date shown above.