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are allowable as amounts paid for the production or collection of
income under section 212(1). Expenses deducted under section
162(a) generally are subtracted in full from gross income to
arrive at adjusted gross income. However, expenses deducted
under section 212 ordinarily are subtracted from adjusted gross
income to arrive at taxable income and are subject to certain
floor limitations in section 67(a). A deduction under section
212 may also be limited by application of the alternative minimum
tax. See sec. 56(b); see also Guill v. Commissioner, 112 T.C.
325, 328-329 (1999); Benci-Woodward v. Commissioner, T.C. Memo.
1998-395, affd. 219 F.3d 941 (9th Cir. 2000). Additionally, net
operating losses, such as the ones petitioner is claiming, may
carryover under section 172 from the year in which they were
incurred to another year only if the losses were the result of
operating a trade or business within the meaning of section
162(a). See Eppler v. Commissioner, 58 T.C. 691, 696 (1972),
affd. 486 F.2d 1406 (7th Cir. 1973); see also Anderson v. United
States, 48 F.2d 201, 202 (5th Cir. 1931).
Section 162(a) permits a deduction for all “ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business”. Deductions are allowed under
section 212(1) for “the ordinary and necessary expenses paid or
incurred during the taxable year * * * for the production or
collection of income”.
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