Moller v. United States

721 F.2d 810 (Fed. Cir. 1983)

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Nature of the Case

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Facts

Since 1965 Moller (P) relied almost entirely on the income derived from their investments for support. They also had two small pensions and social security payments. Ps had full management and control over all four of their investment portfolios including those held in trust. In 1976-77 they devoted their full time to their investment activities. They kept regular office hours and monitored the stock market on a daily basis. They made all their investment decisions on their own, and the total value of all their portfolios was $13.5 million in 1976 and $14.5 million in 1977. They held their stocks an average of 3.5-8 years and made only $612 in 1976 and lost $223 in 1977. They maintained two residences and had investment rooms and places in each where they conducted their business. They kept regular hours and used those areas exclusively to investment activities. They incurred expenses of $22,659.91 in 1976 and $29,561.69 in 1977 and deducted them from their joint income tax returns. The expenses attributable to maintaining their two home offices were $7,439.65 and $7,247.21 respectively. The IRS disallowed the home office expenses for both offices. P sought to recover the taxes paid plus interest. The Claims Court held that they were investors not traders but were engaged in the trade or business of making investments and therefore entitled to deduct their home office expenses under 280A. The Government appealed.