This section contains the nature of the case and procedural background.

Lumpkin (P) had a life interest under a trust created by a will of her former husband to 1/2 of the stock of a corporation that had the rights to distribute cola syrup in South Carolina. P purchased the remaining stock of the corporation for $225,885 from the trustees to whom it had been bequeathed to establish an orphanage. The Attorney General of South Carolina instituted an action to invalidate the sale and to require P to account for the profits. P defended the suit at a cost in excess of $27,000. P then deducted these expenses from the tax years in question and they were denied by the IRS. P contends that these expenses, under 121(a), were deductible as ordinary and necessary expenses for carrying on a trade or business and were allowable as deductions from gross income. Under the expanded rules, P claimed that the property was held for production of income and the money was spent in connection with that production.

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