The taxpayer, who was a teacher by profession, owned eight rent-producing property of which seven had to be sold, following a recession, with the shortfall between the proceeds and mortgages on the sold properties being the amount of new mortgages that the taxpayer was required to place on his remaining property.
The taxpayer was able to deduct interest on the new mortgage based on a finding that he was in a business. Given that no management fee of any sort was paid by him, it followed that he saw to the financing, rental, upkeep and improvement of the properties over the years and he pooled the income resulting from the operations. He was engaged in the business of managing and operating the properties as opposed to merely collecting rents.