Opinion ID: 6860040
Heading Depth: 1
Heading Rank: 2

Heading: Deduction of Salary and Expense Items in 1925.

Text: In taxpayer’s returns for these years (1924 and 1925), he claimed certain deductions for salaries, for expenses and for accountant's fees. The Commissioner materially reduced each of these items for each year. The Board reversed this determination of the Commissioner as to the items in 1924 (allowing them in full) but sustained the reductions as to 1925. It is of this latter action, the executor here complains. The estate of Hartley included various securities, fifteen iron mines operated under royalty leases, and several thousand pieces of real estate (consisting of farms and improved city rental properties). In the conduct of this business, decedent maintained a considerable office organization which was supervised by a general office manager who employed assistants, bookkeepers, stenographers, and an engineer who supervised collection of royalties on the iron mines. This organization was continued by the executor and was in operatiqn during 1924 and 1925. The items claimed as deductions for these two years were the salaries and expenses of this organization and certain accountant fees. There was no distribution of the estate until February 24, 1925. On that date there was distribution of all of the personalty (except certain bonds necessary to provide annuities required by the will), the home place and one quarter section of land in. Itasca county on whieh was an iron mine. There was no other distribution of real estate until 1928. After this distribution this organization continued conduct of the distributed properties as if they were still included in the estate. The value of the distributed property was apparently. above-two thirds of the value of the entire estate. There is no claim that these expenditures were not proper or necessary. The Commissioner disallowed something more than one-third of the salaries ($6,191.67), one-half the expenses ($1,0-27.39), and more than two-thirds of the accountant ($1,663.14) items for 1925. His reason as to all was an apportionment between estate and distributed property service and as to the accountant item the additional reason that some of such service was attributable to administration of the estate and not to the income-producing business of the estate. The Board sustained the Commissioner as to these reductions on the ground that the executor had “failed to overcome the presumptive correctness of the respondent’s determination.” The executor is silent here as to the item of accountant’s fees. As to salaries and expenses there is no opposition here to an apportionment because of the distribution but the claims are: First, that since the distribution did not occur’ until after two months (roughly) of 1925- had passed, one-sixth of the salaries and expenses should be allowed in toto; and, second, that the property distributed was of a character (securities and only one mine) requiring little time and effort from the organization while that remaining in the estate (consisting of mines and real estate holdings) require much time and attention. Thex’e is an appealing plausibility in this argument but the record here is barren of aixy facts wherefrom we can say with proper certainty that the Commissioner and the Board both have erred and if so to what extent. We must conclude that the Board was correct in its statement and conclusion as to this matter.