CitationHiggins v. Commissioner, 312 U.S. 212, 61 S. Ct. 475, 85 L. Ed. 783, 1941 U.S. LEXIS 1267, 41-1 U.S. Tax Cas. (CCH) P9233, 25 A.F.T.R. (P-H) 1160, 1941-1 C.B. 340, 1941 P.H. P62,020 (U.S. Feb. 3, 1941)
Brief Fact Summary. Petitioner lived in Paris, France and maintained a New York office for managing a personal portfolio. He hired a staff and rented office space and attempted to deduct these costs as business expenses.
Synopsis of Rule of Law. All ordinary and necessary expenses paid or incurred during a tax year in carrying on a trade or business are deductible.
Taxpayer, Petitioner, had extensive investments in real estate and securities. He devoted time to overseeing these interests and hired others to assist him. He claimed the salaries and expenses for looking after these investments as deductible business expenses. The Board of Tax Appeals found that the activities did not count as a carrying on a business because the activities were for personal business regardless of the amount of time involved. The Court of Appeals affirmed.
Issue. May the expenses be deducted as business expenses?
Held. Justice Reed issued the opinion for the Supreme Court of the United States in affirming the lower courts and holding that the expenses are not deductible because was he was not carrying on a business.
Discussion. Points of Law - for Law School Success
Whether a taxpayer is carrying on a trade or business requires an examination of all the facts in each case. View Full Point of Law
The Supreme Court found that there was not sufficient evidence to establish that Petitioner was carrying on a business. Rather, he was managing his personal portfolio. Size of a personal portfolio does not factor into considering whether or not something is a business.