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petitioners were engaged in the trade or business of buying,
developing, and selling real estate during 1996, or that the
Cumberland house was held in the ordinary course of such a trade
or business.
Finally, the argument may be suggested that the deductions
should be allowable under section 212(1). That section allows a
deduction for, inter alia, ordinary and necessary expenses paid
“for the production or collection of income”. When one analyzes
the situation here, however, it becomes apparent that these
expenses were costs associated with the sale of the Cumberland
house and not for the production or collection of income. We are
concerned here with the origin and character of the expenses for
which the deductions were claimed. See United States v. Gilmore,
372 U.S. 39 (1963). As we have already noted, any rental
activity had been abandoned, and petitioners were not in a trade
or business of developing the property for sale. Petitioners
held the property for sale. If petitioners had not moved into
the Cumberland house and it had remained on the market until
sold, those expenses, if deductible at all,3 would have been
considered as expenses of the sale. See Cramer v. Commissioner,
55 T.C. 1125, 1132 (1971); see also Hadley Falls Trust Co. v.
3 For example, of the depreciation claimed, $850.50 was for
office equipment. The balance ($2,789) is not explained. We are
unsure how the depreciation was an ordinary and necessary expense
of the sale of the property.
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