Source: https://openjurist.org/312/us/212
Timestamp: 2019-04-23 11:59:01+00:00

Document:
Petitioner, the taxpayer, with extensive investments in real estate, bonds and stocks, devoted a considerable portion of his time to the oversight of his interests and hired others to assist him in offices rented for that purpose. For the tax years in question, 1932 and 1933, he claimed the salaries and expenses incident to looking after his properties were deductible under Section 23(a) of the Revenue Act of 1932.1 The Commissioner refused the deductions. The applicable phrases are: 'In computing net income there shall be allowed as deductions: (a) Expenses. * * * All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business * * *.' There is no dispute over whether the claimed deductions are ordinary and necessary expenses. As the Commissioner also conceded before the Board of Tax Appeals that the real estate activities of the petitioner in renting buildings2 constituted a business, the Board allowed such portions of the claimed deductions as were fairly allocable to the handling of the real estate. The same offices and staffs handled both real estate and security matters. After this adjustment there remained for the year 1932 over twenty and for the year 1933 over sixteen thousand dollars expended for managing the stocks and bonds.
Petitioner's financial affairs were conducted through his New York office pursuant to his personal detailed instructions. His residence was in Paris, France, where he had a second office. By cable, telephone and mail, petitioner kept a watchful eye over his securities. While he sought permanent investments, changes, redemptions, maturities and accumulations caused limited shiftings in his portfolio. These were made under his own orders. The offices kept records, received securities, interest and dividend checks, made deposits, forwarded weekly and annual reports and undertook generally the care of the investments as instructed by the owner. Purchases were made by a financial institution. Petitioner did not participate directly or indirectly in the management of the corporations in which he held stock or bonds. The method of handling his affairs under examination had been employed by petitioner for more than thirty years. No objection to the deductions had previously been made by the Government.
Even acquiescence11 in some Board rulings after defeat does not amount to settled administrative practice.12 Unless the administratives practice is long continued and substantially uniform in the Bureau and without challenge by the Government in the Board and courts, it should not be assumed, from rulings of this class, that Congressional reenactment of the language which they construed was an adoption of their interpretation.
47 Stat. 169, c. 209, 26 U.S.C.A.Int.Rev.Code, § 23(a).
Cf. Pinchot v. Commissioner, 2 Cir., 113 F.2d 718.
2 Cir., 111 F.2d 795.
Kales v. Commissioner, 6 Cir., 101 F.2d 35, 122 A.L.R. 211; DuPont v. Deputy, 3 Cir., 103 F.2d 257.
38 Stat. 167, Section II B.
40 Stat. 1066, Sec. 214(a)(1).
Cf. Helvering v. New York Trust Co., 292 U.S. 455, 467, 468, 54 S.Ct. 806, 809, 810, 78 L.Ed. 1361.
O.D. 537, 2 C.B. 175 (1920); O.D. 877, 4 C.B. 123 (1921); I.T. 2751, XIII-1 C.B. 43 (1934). See also 1934 C.C.H. Federal Tax Service, Vol. 3, 6035, p. 8027.
Biddle v. Commissioner, 302 U.S. 573, 582, 58 S.Ct. 379, 383, 82 L.Ed. 431. Cf. Estate of Sanford v. Commissioner, 308 U.S. 39, 52, 60 S.Ct. 51, 59, 84 L.Ed. 20. But see Helvering v. Bliss, 293 U.S. 144, 151, 55 S.Ct. 17, 20, 79 L.Ed. 246, 95 A.L.R. 207, and McFeely v. Commissioner, 296 U.S. 102, 108, 56 S.Ct. 54, 57, 80 L.Ed. 83, 101 A.L.R. 304.
Kissel v. Commissioner, 15 B.T.A. 1270, acquiesced in VIII-2 C.B. 28 (1929); Croker v. Commissioner, 27 B.T.A. 588, acquiesced in XII-1 C.B. 4 (1933).
Higgins v. Smith, 308 U.S. 473, 478, 479, 60 S.Ct. 355, 358, 84 L.Ed. 406.
Bedell v. Commissioner, 2 Cir., 30 F.2d 622, 624; Monell v. Helvering, 2 Cir., 70 F.2d 631; Kane v. Commissioner, 2 Cir., 100 F.2d 382.
Kales v. Commissioner, 6 Cir., 101 F.2d 35, 122 A.L.R. 211; DePont v. Deputy, 3 Cir., 103 F.2d 257, 259, reversed on other grounds, 308 U.S. 488, 60 S.Ct. 363, 84 L.Ed. 416.
Kales v. Commissioner, 34 B.T.A. 1046; Id., 6 Cir., 101 F.2d 35, 122 A.L.R. 211.
1 Cir., 75 F.2d 326.
8 Cir., 51 F.2d 949, 953.
Cf. Roebling v. Commissioner, 37 B.T.A. 82; Heilbroner v. Commissioner, 34 B.T.A. 1200.
220 U.S. 107, 171, 31 S.Ct. 342, 357, 55 L.Ed. 389, Ann.Cas.1912B, 1312.
Id., 220 U.S. page 169, 31 S.Ct. page 356, 55 L.Ed. 389, Ann.Cas.1912B, 1312.
Cohens v. Virginia, 6 Wheat. 264, 399, 5 L.Ed. 257; Puerto Rico v. Shell Co., 302 U.S. 253, 269, 58 S.Ct. 167, 174, 82 L.Ed. 235.
Revenue Act of 1932, 47 Stat. 169, § 272, 26 U.S.C.A.Int.Rev.Acts, page 558; Internal Revenue Code, § 272, 26 U.S.C.A.Int.Rev.Code, § 272.
Internal Revenue Code, § 1141, 26 U.S.C.A.Int.Rev.Code, § 1141.
Van Wart v. Commissioner, 295 U.S. 112, 115, 55 S.Ct. 660, 79 L.Ed. 1336.
3 Paul & Mertens, Law of Federal Income Taxation § 23.65; cf. National Outdoor Advertising Bureau v. Helvering, 2 Cir., 89 F.2d 878, 881.

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