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be allowable as a deduction for the taxable year
in which paid or incurred.
[Emphasis added.]
Respondent, citing the underlined portion of section 195,
contends that petitioner anticipated that her income-producing
activities would become an active trade or business. Therefore,
respondent argues, expenses paid or incurred in the income-
producing activity must be capitalized. Respondent’s argument
fails for several reasons.
Ordinary and necessary expenses for all income-producing
activities, whether they are for business under section 162 or
nonbusiness under section 212, are intended to be on equal
footing. Snyder v. United States, 674 F.2d 1359, 1364 (10th Cir.
1982); Looney v. Commissioner, T.C. Memo. 1985-326, affd. without
published opinion 810 F.2d 205 (9th Cir. 1987). This means that
the distinction between an ordinary expense and a capital
expenditure should be applied in the same manner under both
sections. Woodward v. Commissioner, 397 U.S. 572, 575 n.3
(1970). This Court construes the term “startup expenditure” to
denote an expenditure that is capital rather than ordinary. This
Court will not interpret section 195 to override the
deductibility of ordinary and necessary expenses petitioner
incurred in an ongoing section 212 activity any more than it
would do so for an ongoing section 162 activity. See Crane v.
Commissioner, 331 U.S. 1, 13 (1947) (“one section of the act must
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