Tax Legal Services · Primary-source case analysis

Higgins: Managing One’s Own Investments Was Not a Trade or Business

By Aneeta Mishra and Timothy Chan

Published September 17, 2026

Higgins v. Commissioner involved a taxpayer who devoted substantial resources to supervising real-estate holdings, bonds, and stocks and sought to deduct the related expenses as ordinary and necessary business expenses.

The taxpayer maintained a substantial investment operation

The taxpayer kept offices in New York and Paris, employed staff, maintained records, collected income, and made investment decisions. The volume and continuity of activity were significant.

Personal investing still was not a trade or business

The Court held that keeping records, collecting returns, and managing one’s own securities did not constitute carrying on a trade or business under the governing deduction provision. Scale alone did not change the character of the activity.

Real-estate activity was treated separately

The litigation distinguished expenses attributable to rental real estate from those incurred in supervising securities. Allocation mattered because different activities can have different tax treatment even when administered by the same staff.

Current law contains separate investment-expense rules

Higgins predates major Code revisions, including section 212 and later limitations on miscellaneous itemized deductions. A current return must classify each expense under present law rather than relying on Higgins alone to allow or disallow it.

Key takeaways

• Identify whether the taxpayer provides services to others or only manages personal assets.
• Allocate shared expenses among real estate, securities, and any operating business.
• Separate section 162 business expenses from section 212 investment expenses.
• Apply current deduction suspensions and capitalization rules for the tax year.