HIGGINS V. COMMISSIONER
312 U.S. 212 (1941)
NATURE OF THE CASE: This was a dispute over costs associated with looking after extensive
personal investment properties.
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.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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