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Commissioner v. Idaho Power Co., 418 U.S. 1, 17 (1974); Sharon v.

Commissioner, 66 T.C. 515, 523 (1976), affd. 591 F.2d 1273 (9th

Cir. 1978).

To be deductible under section 162(a), an item must (1) be

paid or incurred during the taxable year, (2) be for carrying on

any trade or business, (3) be an expense (rather than a capital

expenditure), (4) be a necessary expense, and (5) be an ordinary

expense.

Commissioner

v.

Lincoln

Sav.

&

Loan

Association,

403

U.S.

345,

352

(1971).

Here,

we

are

primarily

concerned

with

the

second requirement; i.e., whether petitioner and Mrs. Wood

incurred the disallowed expenses while carrying on a trade or

business.

Petitioner contends that he and Mrs. Wood were in the trade

or

business

of

dealing

in

real

estate.

He

asserts

that

their

intent and commitment to be real estate dealers is evidenced by

(1) petitioner’s promoter activities with MSPR, Inc., (2)

petitioner’s and Mrs. Wood’s obtaining real estate licenses,

taking real estate education courses, and being employed by a New

Jersey real estate development company, (3) petitioner’s

registering the business name “Logistics Technology Group” in New

Jersey, establishing bank accounts in that business name, and

paying the expenses of their seven properties from that account,

and (4) petitioner’s advertising the New Jersey house, the

Florida house, and the undeveloped Florida land.

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