Vance Orpheus Bright, Jr. and Mary Frances Bright - Page 8




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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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