Business owners can generally deduct the ordinary and necessary costs incurred in the course of business, if they can substantiate them. One married couple deducted marketing fees paid by their S corp to a C corp owned by the husband. But the deduction was denied by the U.S. Tax Court when a review showed that no marketing or promotion was done on the S corp’s behalf. The funds were used instead to pay personal family expenses. The S corp was also denied a deduction for rent paid to the couple for business use of their home. Records showed the amount deducted was unreasonable and the funds weren’t used for rent. Travel expenses were also denied due to inadequate records. (TC Memo 2023-140)
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