Higgins v. Commissioner

312 U.S. 212 (1941)

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Nature of the Case

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Facts

Higgins (P) held extensive investments in real estate, stocks and bonds and devoted a considerable amount of time to the oversight of his interests. In 1932 and 33 he deducted the salaries and expenses of those who assisted him in the oversight of his holdings. P claimed these deductions under 23(a). The IRS disallowed the deductions. There was no dispute over whether the claimed deductions are ordinary and necessary expenses. The IRS conceded before the tax court that the real estate activities of P in renting buildings constituted a business. However, they maintained that the expenses were not deductible as a business because this was the management of personal holdings and as such this activity was not a trade or business within the code. Everybody along the way agreed with the IRS. The Supreme Court granted certiorari. P claims that the elements of continuity, repetition, regularity, and extent differentiate his activities from the occasional small investor. The IRS contends that mere personal investment activities never constitute carrying on a trade or business no matter how much of one's time or one's employees' time they may occupy.