Court Opinion

ID: 9638004
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:29:20.884754+00
Date Added: 2024-06-11T18:05:00.131256
License: Public Domain

MARIS, Circuit Judge,
concurring.
Section 23 of the Revenue Act of 1928, 45 Stat. 799, 26 U.S.C.A. § 23, provides that in computing net income for income tax purposes there shall be allowed as deductions “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” The District Court found as a fact in this case that the plaintiffs business was primarily that of “conserving and enhancing his estate.” 22 F.Supp. 589, 597. The finding was undoubtedly supported by ample evidence. If we premise this fact, as I think we must, it follows that the plaintiff was entitled, in computing his taxable net income for the year 1931, to deduct all the ordinary expenses paid during that year which were necessary to conserve his estate.
At the beginning of the year the plaintiff was faced with the fact that he owed the Delaware Realty and Investment Company 141,912 shares of common stock of E. I. du Pont de Nemours & Company. The history of this loan and the purposes for which the stock was borrowed are in my view wholly irrelevant. Whatever the reason, the fact remained that in 1931 he found himself under a binding obligation to the Delaware Company -either to return the borrowed stock or to pay an amount equivalent to the dividends on the borrowed shares plus the taxes paid by the Delaware Company by reason of the loan. Since he no longer owned the shares borrowed the return of them would have necessarily involved the depletion of his estate • by the amount required to purchase an equivalent number. He elected to take *260the only other course which was open to him and paid to the Delaware Company the sum of $647,711.56, which represented the amount of the dividends paid on the stock plus the taxes of the Delaware Company with respect thereto.
This payment unquestionably conserved the plaintiff’s estate. If it had not been made his invested funds would have faced the certainty of a serious diminution. The necessity of the expense is clear. The diminution of his principal which would have resulted if the payment had not been made would undoubtedly have carried with it an inevitable diminution in taxable income which might well have been substantially equivalent to the deduction here sought. The inherent justice of his claim will thus be seen.
I am equally satisfied that the expense was an ordinary one within the meaning of the statute. Certainly there is no expense in human experience which is more ordinary than that incurred by a debtor in fulfilling his agreement with his creditors. It is true that this expense usually takes the form of interest. It may well be that the expenditure which the plaintiff made in this case was a payment of interest in . the broadest sense. It is certain, however, that it was compensation for the loan of stock which he had made and as such it'was an ordinary and usual expense of a transaction of that character. Dart v. Commissioner of Internal Revenue, 4 Cir., 74 F.2d 845.
I accordingly concur in the conclusion reached by my colleagues that the amount of the judgment entered by the District Court in favor of the plaintiff should be increased from $54,439.52 to $172,351.64.