Court Opinion

ID: 9443249
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:15:37.666203+00
Date Added: 2024-06-11T17:29:25.528199
License: Public Domain

WOODROUGH, Circuit Judge
(dissenting in part).
I agree with the majority conclusion affirming decision of the Tax Court that the taxpayer’s lump sum payment of $35,000 to his divorced wife and of $20,000 to her attorney did not constitute periodic payments of alimony, within Section 22(k) of the Internal Revenue Code, 26 U.S.C.A, § 22 (k) and were not deductible.
But I am unable to agree that the taxpayer’s payments to his own attorneys for the services which they performed for him in negotiating and working out the compromise settlement of his family problems, including divorce and provisions for his wife and daughter, were deductible. I think the attorneys worked to minimize “personal, living or family expenses” of the taxpayer and did nothing in the “production or collection of income” or in the “management, conservation, or maintenance of property".
It seems to me that the decision here has gone counter to the decision handed down by the Supreme Court in Lykes v. United States, 343 U.S. 118, 72 S.Ct. 585. There attorneys’ fees sought to be deducted under Section 23(a) (2) were paid to attorneys who worked to minimize expense to the taxpayer incidental to certain gifts made by him. Gifts are the antithesis of “production of income” or “conservation of property” and because the services were attributable to the gifts, the cost of the attorneys’ services was held not to be deductible.
This case should turn on the same principle. The attorneys’ services here were to minimize the cost to the taxpayer of the settlement of his family difficulties. Therefore the matter to which the fees were attributable was as far removed from “production of income” or “conservation of property” as was the making of gifts in the Lykes case. But it is the matter to which the services are attributable that controls and I think the decision in the Lykes case clearly admonishes against sanctioning deduction under Section 23(a)(2) in this case.