Court Opinion

ID: 9641315
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:28:23.373784+00
Date Added: 2024-06-11T18:10:36.533654
License: Public Domain

MATHEWS, Circuit Judge.
Here for review are two decisions of the Board of Tax Appeals redetermining claimed deficiencies in respect of income taxes of petitioner, Edward A. Sparkman (also known as Ned A. Sparks), for 1934 and 1935. As to 1934, respondent, the Commissioner of Internal Revenue, determined that there was a deficiency of $562.-82. The Board decided that, instead of a deficiency, there was an overpayment of $115.52. Petitioner claims an overpayment of $10,295.11. As to 1935, respondent determined that there was a deficiency of $6,295.89. The Board decided that there was a deficiency of $5,902.43. Petitioner claims there was no deficiency.
Questions presented are (1) whether, as claimed by petitioner, salary earned and received by him after a property settlement with his wife, Mercedes Sparkman, on January 23, 1934, was community property and', therefore, taxable one-half to each spouse, or whether, as claimed by respondent, such salary was the separate property of petitioner and, therefore, taxable to him alone; and (2) whether, as claimed by petitioner, $3,000 of a total expenditure of $3,500 for artificial teeth was an ordinary and necessary business expense and, therefore, deductible from petitioner’s gross income in computing his net income for 1935, or whether, as claimed by respondent, this was a personal expense and, therefore, not deductible. The Board decided both questions adversely to petitioner.
First. Petitioner and his wife were married in 1930 and were at all pertinent times domiciled in California. Petitioner is a motion picture actor and radio performer and, as such, earned and received *776a salary in 1934 and 1935. Part of his 1934 salary was earned and received before January 23, 1934, part of it after-wards. On January 23, 1934, petitioner and his wife entered into a written agreement which recited that they desired, “once and for all time,” to settle their respective property rights, and provided that petitioner should pay his wife $15,-000 for her support and maintenance; that each of the parties should have as his or her “sole and separate property, free and clear of any claim or claims on the part of the other paijty,” specified property then in his or her possession; and that “all future earnings or income of each of the parties” should be his or her separate property. The agreement was performed in accordance with its terms.
Thereafter, in a divorce action against petitioner, petitioner’s wife obtained an interlocutory judgment on March 13, 1935, and a final judgment on April 17, 1936. The agreement of 'January 23, 1934, was not mentioned in either of those judgments, but, in a subsequent action by petitioner’s wife against petitioner in a state •court of California, it was held and adjudged that the agreement was valid and that, by reason thereof, all earnings of petitioner after January 23, 1934, were - his separate property.
It is clear that so much of petitioner’s 1934 salary as was earned and received by him before January 23, 1934, was community property in which petitioner and his wife had present, existing and equal interests (California Civil Code, §§ 161a to 164, 169, 687) 1 and was, therefore, taxable one-half to each spouse. United States v. Malcolm, 282 U.S. 792, 794, 51 S.Ct. 184, 75 L.Ed. 714. See, also, Poe v. Seaborn, 282 U.S. 101, 108-118, 51 S.Ct. 58, 75 L.Ed. 239; Goodell v. Koch, 282 U.S. 118, 120-122, 51 S.Ct. 62, 75 L.Ed. 247; Hopkins v. Bacon, 282 U.S. 122, 125-127, 51 S.Ct. 62, 75 L.Ed. 249; Bender v. Pfaff, 282 U.S. 127, 130-132, 51 S.Ct. 64, 75 L.Ed. 252. The Board so held and, of that holding, no complaint is made.
The agreement of January 23, 1934, could not and did not change the marital status of petitioner and his wife, but it could and did change the status of their property, including future earnings, from community property to separate property. California Civil Code, §§ 158— 160;2 Wren v. Wren, 100 Cal. 276, 279, *77734 P. 775, 776, 38 Am.St.Rep. 287; In re Davis’ Estate, 106 Cal. 453, 455, 39 P. 756, 757; Kaltschmidt v. Weber, 145 Cal. 596, 599, 79 P. 272, 274; Perkins v. Sunset Tel. & Tel. Co., 155 Cal. 712, 719, 103 P. 190, 193; Cullen v. Bisbee, 168 Cal. 695, 698, 144 P. 968, 969; Helvering v. Hickman, 9 Cir., 70 F.2d 985, 986; Van Every v. Commissioner, 9 Cir., 108 F.2d 650, 651. Accordingly, the Board held, and rightly so, that salary earned and received by petitioner alter January 23, 1934, was his separate property and was, therefore, taxable to him alone. Helvering v. Hickman, supra; Van Every v. Commissioner, supra.
Petitioner argues that, though valid as between the parties, the agreement of January 23, 1934, should be disregarded in determining their income tax liability for 1934 and 1935. Similar arguments were considered and rejected in the Hickman and Van Every cases. We adhere to the views there expressed.
Second. In 1935 petitioner purchased for himself two sets of artificial upper teeth, paying therefor $3,500. In computing his net income for 1935, petitioner deducted $3,000 of the $3,500 as an ordinary and necessary business expense. Respondent, holding the expense was a personal one, disallowed the deduction and was sustained by the Board. This ruling is assigned as error.
Sections 23 and 24 of the Revenue Act of 1934, c. 277, 48 Slat. 688, 691,3 provide:
“Sec. 23. Deductions from gross income.
“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. * * *
“Sec. 24. Items not deductible.
“(a) General rule. In computing net income no deduction shall in any case be allowed in respect of—
“(1) Personal, living, or family expenses * *
The Board found: “Petitioner’s natural teeth had [prior to 1935] been replaced with an artificial upper denture. Petitioner had difficulty in articulation and detected a slight hiss which was objectionable and perhaps fatal to his continued employment in his profession. For all other purposes his teeth were satisfactory. In order to correct this condition, petitioner [in 1935] had two sets of upper dentures made at a cost to him of $3,500. The new teeth eliminated the hiss and restored to petitioner perfect enunciation. Two sets of teeth were purchased to insure against delay in petitioner’s work in the event one set was damaged or destroyed while a picture was being filmed.”
There was no finding, nor any evidence warranting a finding, that the teeth purchased by petitioner in 1935 were used or intended to be used for business purposes only. As petitioner — who had the burden of proof — offered no evidence on this point, it must be assumed that the teeth were intended to be and were used, not only during business hours and for business purposes, but at other times and for other purposes as well. Wc conclude, as the Board did, that the $3,500 paid for the teeth was not an expense incurred in carrying on a trade or business, within the meaning of § 23(a), supra, but was a personal expense, within the meaning of § 24(a) (1), and that,, consequently, no paid thereof was deductible in computing petitioner’s net income. Compare Bourne v. Commissioner, 4 Cir., 62 F.2d 648, 649.
The Board’s opinion states: “The statute [§ 24] expressly disallows ‘personal’ expenses. It would be difficult to imagine anything more personal than a set of false teeth. Although the immediate suggestion that the purchase of the new upper dentures be made may have occurred in connection with [petitioner’s] professional activity, the expenditure was nevertheless so purely personal in character as to deny it classification as a business expense.” With this we agree.
Whether this personal expense was ordinary or extraordinary, necessary or unnecessary, we have no occasion to decide. For § 24(a) (1) prohibits the deduction of personal expenses “in any case.” The prohibition applies to ordinary and necessary personal expenses, as well as to those which are extraordinary and unnecessary. Allowance of deductions from gross income in computing net income “depends upon legislative grace; and *778only as there is clear provision therefor can any particular deduction be allowed.” New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440, 54 S.Ct. 788, 790, 78 L.Ed. 1348; Deputy v. du Pont, 308 U.S. 488, 493, 60 S.Ct. 363, 84 L.Ed. 416. A fortiori, there can be no allowance of ■ a deduction which by statute is expressly prohibited.
In Blackmer v. Commissioner, 2 Cir., 70 F.2d 255, 92 A.L.R. 982, cited by petitioner, the sums held deductible were expended for theater tickets, luncheons, dinners and suppers given by the taxpayer (an actor) to others for publicity purposes. Here the claimed expenditure was for artificial teeth purchased by petitioner for himself and, so far as the record shows, not given away. Obviously, the Blackmer .case is not in point.
Decisions affirmed.

 California Civil Code, §§ 161a to 164, 169, 687:
“§ 161a. Interests in community property. The respective interests of the husband and wife in community property during continuance of the marriage relation are present, existing and equal interests under the management and control of the husband. * * *
“§ 162. Separate property of the wife. All property of the wife, owned by her before marriage, and that acquired after-wards by gift, bequest, devise, or descent, with the rents, issues, and profits thereof, is her separate property. * * *
“§ 163. Separate property of the husband. All property owned by the husband before marriage, and that acquired afterwards by gift, bequest, devise, or descent, with the rents, issues, and profits thereof, is his separate property.
“§ 164. Property acquired after marriage. All other property acquired after marriage by either husband or wife, or both, including real property situated in this state, and personal property wherever situated, heretofore or hereafter acquired while domiciled elsewhere, which would not have been the separate property of either if acquired while domiciled in this state i is community pioperty. * »
“§ 169. Earnings of wife, when living separate, separate property. The earnings and accumulations of the wife, and of her minor children living with her or in her custody, while she is living separate from her husband, are the separate property of the wife.”
“§ 687. Oommunity property. Community property is property acquired by husband and wife, or either, during marriage, when not acquired as the separate property of either.”

 California Civil Code, §§ 158 — 160:
“§ 158. Husband and wife may malee contracts. Either husband or wife may enter into any engagement or transaction with the other, or with any other person, respecting property, which either might if unmarried; subject, in transactions between themselves, to the general rules which control the actions of persons occupying * * * confidential relations with each other * * *.
“§ 159. Husband and wife. Property relations. A husband and wife cannot, by any contract with each other, alter their legal relations, except as to property, and except that they may agree, in writing, to an immediate separation, and may make provision for the support of either of them and of their children during such separation.
*777“§ ISO. Consideration for agreement of separation'. ' The mutual consent of the parties is e. sufficient consideration for such an agreement as is mentioned in the last section.”

 26 U.S.C.A. Int.Bev.Code, §§ 23, 24..