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petitioner’s relationship with Buck Sales or how the amounts
spent by petitioner, such as the legal or consulting fees,
related to a business or investment activity. Petitioner claims
that these amounts are deductible because they involved the
investigation of a possible investment opportunity. Section
212(1) or (2) permits a deduction for all ordinary and necessary
expenses paid for the production or collection of income or
maintenance of property held for the production of income.
However, expenses deductible under section 212(1) or (2) must
relate to income-producing property or property rights in which
the taxpayer has an existing interest. Frank v. Commissioner, 20
T.C. 511, 514 (1953); Beck v. Commissioner, 15 T.C. 642, 670
(1950), affd. per curiam 194 F.2d 537 (2d Cir. 1952).
Petitioners have not shown that the expenditures petitioner made
relate to income-producing property or property rights in which
petitioner had an existing interest; therefore these expenses are
not deductible under section 212(1) or (2).
Section 165(c)(2) authorizes a deduction for losses incurred
by individuals and not compensated for by insurance or otherwise
which are “incurred in any transaction entered into for profit”.
Petitioner has not shown that the expenditures qualify for a
deduction under section 165(c)(2). Petitioner did not show
whether he had a profit motive with respect to the expenditures.
He also failed to show that he was involved in a “transaction” as
that term is used in the statute. In Seed v. Commissioner, 52
T.C. 880, 885 (1969), it was explained that “the phrase ‘a
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