- 11 -
1992); Peters, Gamm, West & Vincent, Inc. v. Commissioner, T.C.
Memo. 1996-186.
Section 212 allows an individual to deduct all ordinary and
necessary expenses paid or incurred in (1) producing income, (2)
managing, conserving, or maintaining property held for the
production of income, or (3) determining, collecting, or refunding
a tax.
Litigation expenses may be deductible under either section 162
or section 212. See Guill v. Commissioner, 112 T.C. 325, 328-329
(1999); Davis v. Commissioner, T.C. Memo. 1999-250; Peters, Gamm,
West & Vincent, Inc. v. Commissioner, supra. Section 162(a)
governs the deductibility of litigation costs as a Schedule C
business expense, while section 212 governs the deductibility of
litigation costs as a Schedule A miscellaneous itemized deduction,
when the costs are incurred as a nonbusiness profit-seeking
expense. See Guill v. Commissioner, supra at 328. Sections 162(a)
and 212 are considered in pari materia, except that section 162(a)
requires a trade or business, whereas section 212 requires the
pursuit of investing or profit making that lacks the regularity and
continuity of a business. See United States v. Gilmore, 372 U.S.
39, 44-45 (1963); Guill v. Commissioner, supra at 328. Thus, in
order for petitioner’s legal expenses to be deductible as a
Schedule C business expense, petitioners must demonstrate that in
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