Case Name: Appeal of DAVID G. JOYCE
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1926-01-19
Citations: 3 B.T.A. 393
Docket Number: Docket No. 476
Parties: Appeal of DAVID G. JOYCE.
Judges: Before Sterni-iagen and Arundell.
Reporter: Reports of the United States Board of Tax Appeals
Volume: 3
Pages: 393–397

Head Matter:
Appeal of DAVID G. JOYCE.
Docket No. 476.
Submitted October 22, 1925.
Decided January 19, 1926.
J. Harry Covington, Esq., M. P. Wormhoudt, Esq., and Howard Kroehl, C. P. A., for the taxpayer.
Robert A. Littleton, Esq., for the Commissioner.
Before Sterni-iagen and Arundell.

Opinion:
OPINION.
Arundell
: The only question in this appeal is whether or not the expenditure of $15,000 for legal services, in the circumstances set forth in the findings of fact, may be properly classified as a business expense, so that the taxpayer shall be entitled to deduct it from his gross income. Section 214 (a) (1), Eevenue Act of 1918, provides that there shall be allowed to individuals as deductions, "all the ordi nary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." It is argued on behalf of the taxpayer that he is engaged in the business of managing, investing, and preserving his estate, and that the attack, or threatened attack, by his wife on the postnuptial agreement was an attack upon or a claim against his property. It is not asserted that the expense of every litigation which might result in diminishing the taxpayer's estate would be a business expense. The contention is that the agreement related to his property, and, since the property was the "subject matter" of his business, the agreement had the effect of giving him greater freedom in managing his "business property"; therefore, the expense of defending and maintaining this agreement is a business expense. This reasoning is ingenious, but we do not think it is sound. We pass the question of whether this taxpayer was carrying on any trade or business, because its answer is unnecessary to a decision of the case. We think the expenditure, in any event, was not a business expense within the meaning of the statute.
The effect of the agreement may have been all that the taxpayer claims, but that does not determine the character of the agreement or of the claims for its modification. Also, his purpose in entering into the agreement, or in resisting the attacks upon it, is not determinative of the nature of the expense. Any kind of liability to which he might have been subjected, however remote from the carrying on of his business, would have the same results to his estate. The taxpayer's argument ignores the genesis of the rights which he attempted to settle and limit by the postnuptial agreement. Whatever rights the wife had arose out of the marriage relationship, and her claims subsequent to the postnuptial agreement were certainly of the same origin. It is this fact which must determine the nature of the expense of opposing or adjusting those claims. To say that it was an ordinary and necessary expense incurred "in carrying on any trade or business " would be to broaden the scope of this language beyond any reasonable interpretation of it.
It is hardly necessary to allude to the fact that marriage is a personal relationship, except for the purpose of pointing out that the legal rights and obligations annexed to the relationship are also personal, and the expenses connected therewith would, we think, come within the classification of personal or family expenses. The Revenue Act expressly provides that personal and family expenses may not be deducted from gross income.