- 24 -
of property held for the production of income. Respondent
appears to assert that the objective of "making a profit" is the
same as the objective of "producing income." So restrictive an
interpretation would be unwarranted. The Code is replete with
instances in which the expression "taxable income" is used to
refer only to receipts remaining after deduction of expenses.
See, e.g., secs. 63, 161. Hartford v. United States, 265 F.
Supp. 86 (W.D. Wis. 1967)(expenses incurred in the maintenance of
rental property were deductible under section 212, even though
the expenses exceeded receipts from the rental). Section 212
refers to property held for the production of income, not
property held for the production of current taxable income.
Respondent cites no authority to support her view that "income"
in section 212 is to be so limited to current taxable income.
Property held for the production of income does not require that
the property be currently productive, but instead includes
property held for the production of income from gain from its
sale. See Robinson v. Commissioner, 2 T.C. 305 (1943)(upkeep
expense and depreciation deductions allowed on a vacant building
that could not be currently rented).
In Ray v. Commissioner, T.C. Memo. 1989-628, we held that
where a taxpayer claims to hold property for investment purposes,
there must be some affirmative act on the part of the taxpayer to
show that the property has been appropriated to an income-
producing purpose. Because the property at issue in Ray was real
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011