- 6 - Personal investment management does not constitute the carrying on of a trade or business, irrespective of the extent of the investments or the amount of time required to perform the managerial functions. Whipple v. Commissioner, 373 U.S. 193, 199-200 (1963); Higgins v. Commissioner, 312 U.S. 212, 216 (1941); Wilson v. United States, 376 F.2d 280, 293 (1967). Petitioner’s investment activities, as a whole, are not sufficient to constitute the carrying on of a trade or business within the meaning of section 162. Consequently, any deduction allowable in connection with activities relating to personal investment management must meet the requirements under section 212. See Commissioner v. Groetzinger, 480 U.S. 23, 30 n.9 (1987). “Ordinary and Necessary” Expenses Under Section 212 Section 212 allows as a deduction all ordinary and necessary expenses paid or incurred during the taxable year for the production or collection of income, or for the management, conservation, or maintenance of property held for the production of income. Sec. 212(1) and (2). “Ordinary and necessary” means that the expenses must be reasonable in amount and must bear a reasonable and proximate relation to the production or collection of taxable income. Bingham’s Trust v. Commissioner, 325 U.S. 365, 370 (1945); sec. 1.212-1(d), Income Tax Regs.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011