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Petitioners contend in the alternative that if the Court
were to sustain respondent's determinations disallowing the
expenses that they claimed in Schedules C of their 1993 and 1994
returns, they should be allowed to deduct those expenses as
Schedules A deductions for those years. Respondent disagrees
except for the real estate taxes conceded by respondent, see
supra note 6.
Section 212(2) allows a deduction for all the ordinary and
necessary expenses paid or incurred during the taxable year for
the management, conservation, or maintenance of property held for
the production of income. Whether property is held for the
production of income is a question of fact to be determined from
all the facts and circumstances. Sec. 1.212-1(c), Income Tax
Regs. In order to be entitled to a deduction under section
212(2), the taxpayer must have a bona fide profit-making motive
in holding the property in question. Riss v. Commissioner, 56
T.C. 388, 421 (1971), affd. in part and remanded 478 F.2d 1160
(8th Cir. 1973), and affd. sub nom. Commissioner v. Transport
Manufacturing & Equip. Co., 478 F.2d 731 (8th Cir. 1973).
We have found that throughout the years at issue and there-
after to the time of the trial in this case Mr. Hawthorne had not
decided what to do with the properties. On the present record,
7(...continued)
respective bases in the properties and have not shown how any
such bases are to be allocated between nondepreciable land and
depreciable buildings. Consequently, they are not entitled under
sec. 167 to depreciation deductions with respect to the
properties for 1993 and 1994.
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