Paul is a restaurant owner in New York City. To make his restaurant livelier, he decided to renovate his waiting room into a bar. Paul made a deal with a contractor who estimated the work at $150,000. During the construction between March and April, his customer flow declined 35%. (Assume Paul does not take Sec. 179 and bonus depreciation). He also recently heard the term tap dancing to work and thinks that dancing can increase employee morale. Therefore, he offers to pay for dancing lessons for his wait staff, servers, and cooks. Four employees took dancing classes and Paul paid $1,200 for the lessons.

1. Are the renovation costs considered ordinary and necessary expenses?

2. Can he deduct the $150,000 this year? Provide a reason for your answer.

3. Are the dancing lesson costs considered ordinary and necessary expenses?