Rev. Rul. 78-195

A corporation that was formed for the express purpose of investing in real property purchased a tract of unimproved, non-income-producing real property, which it held for two years and sold without having made any substantial improvements. The corporation did not make any significant efforts to sell the property and did not engage in any other transactions in real or personal property or in other commercial activities. During the period that it held the property, the corporation incurred expenses for interest, real property taxes, accounting fees, and general office costs.

Held, the accounting fees and general office costs are expenses related to investment property of the corporation and are deductible by the corporation under section 162 of the Internal Revenue Code of 1954 in the year in which paid or incurred. The interest and real property taxes are deductible by the corporation under sections 163 and 164 of the Code, respectively. See section 266 and the Income Tax Regulations thereunder regarding amounts which may be charged to capital account.