Final answer:
To deduct an expense, a business must pass the all-events test ensuring all events have taken place and the amount of liability can be determined with reasonable accuracy. This is separate from the rational basis test, which is a legal standard for challenges to discriminatory laws.
Step-by-step explanation:
In order to meet the all-events test for deducting an expense, everything necessary to establish the liability giving rise to the deduction must have occurred, and the business must be able to determine the amount of the liability with reasonable accuracy. Meeting this test ensures that a business can legally deduct expenses on their tax returns. The rational basis test, on the other hand, is a legal principle that is used by courts to decide most forms of discrimination. Under this test, the burden of proof falls on those challenging a law or action to show that there is no reasonable merit or necessity for the discriminatory treatment they are receiving.