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the production of income for the business. Instead, the effect
of section 23, the predecessor to section 212, was to provide for
a class of nonbusiness deductions that were incurred in the
production of income or in the management or conservation of
property held for the production of income. Id. at 373-374. The
Court rejected the Commissioner’s claim that expenses can be
deducted under section 23 only if they produce immediate
income.11
Respondent does not dispute that the expenses listed on
petitioner’s tax return were paid by petitioner. However, in her
statutory notice of deficiency, respondent maintains that no
deduction is allowable because petitioner had not placed his
drill rig into business use. Under Bingham’s Trust, petitioner
did not need to place his drill rig into business use in 1991 in
order to be entitled to deductions for expenses incurred in
maintaining his drill rig, as long as he had a profit objective
with respect to its ultimate disposition.
Petitioner has expended substantial amounts of money, time
and effort in the renovation and maintenance of his drill rig.
11See also Bittker & Lokken, Federal Taxation of Income,
Estates and Gifts, par. 20.5.1, at 20-104 (2d ed. 1989). Bittker
& Lokken suggest that the “nonbusiness” label for sec. 212
purposes is simply an abbreviated way of referring to profit-
oriented activities that are not sufficiently frequent and
continuous to be a trade or business. Thus, it follows that sec.
162 allows deductions for expenses incurred in a trade or
business, while sec. 212 allows deductions for expenses incurred
in maintaining an income-producing asset.
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