To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business.
The IRS sometimes challenges deductions claimed for certain types of business expenses. In doing so, an examiner might claim payments made by a corporation to a shareholder for personal items or that are above or below fair market value constitute "constructive dividends." Reclassifying business expenses as dividends has adverse tax consequences, as a recent case demonstrates.