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Chapter 15 - Section 212

Chapter 15 - Section 212 - For Profit Deductions Section...

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For Profit Deductions Section 212 Generally applies to deductions incurred in activities that do not rise to the level of a trade or business but are still incurred during an activity pursued for the production of income. What would this be? Hobbies? Investments? Rentals?
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Higgins v. Commissioner 312 U.S. 212, S.Ct. 475 (1941) Taxpayer operated a real estate business. He also spent considerable time on his separate investments in stocks and bonds. His employees spent their time on both businesses also. Taxpayer deducted all of the costs of the salaries and office costs as ordinary and necessary under section 162.
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Higgins v. Commissioner 312 U.S. 212, S.Ct. 475 (1941) IRS contended that the expenses allocable to the activities of the looking after the investments were not deductible as they were not incurred in an active trade or business. Court eventually sided with the IRS since at the time, only §162 existed. In response, Congress enacted §212.
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Section 212 In the case of an individual, there
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