Court Opinion

ID: 4589676
Source: CourtListenerOpinion
Date Created: 2020-11-20 18:44:45.387188+00
Date Added: 2024-06-11T07:50:19.661500
License: Public Domain

Michael F. McDonald, Petitioner, v. Commissioner of Internal Revenue, RespondentMcDonald v. CommissionerDocket No. 109104United States Tax Court1 T.C. 738; 1943 U.S. Tax Ct. LEXIS 212; March 10, 1943, Promulgated *212 Decision will be entered for respondent.  Petitioner was appointed judge to fill an unexpired term. At the ensuing primary and general elections, he ran for election to a full term.  He expended certain amounts in his own behalf and he also contributed funds to a political committee.  The other candidates also contributed the amounts specified by the committee.  Held, petitioner is not entitled to a deduction under section 23 (a) (1), (A) or (a) (2), as amended, or section 23 (e) (2) of the Internal Revenue Code.  Frederick E. S. Morrison, Esq., and John W. Bodine, Esq., for the petitioner.Myron W. Winer, Esq., for the respondent.  Hill, Judge.  HILL *739  The Commissioner determined a deficiency of $ 2,506.77 for the taxable year ended December 31, 1939.  The sole adjustment contested by petitioner is the disallowance of a deduction of $ 13,017.27 which petitioner expended as "re-election expenses."FINDINGS OF FACT.The petitioner is an individual residing at 6 Brown Street, Ashley, Pennsylvania.  He filed his individual income tax return for the calendar year 1939 with the collector of internal revenue for the twelfth district of Pennsylvania.  Petitioner*213  kept his books on the cash receipts and disbursements basis, and his return for the taxable year 1939 was so prepared.Petitioner is a lawyer, admitted to the bar of the State of Pennsylvania.  He was appointed by the Governor of Pennsylvania to fill an unexpired term as a judge of the Court of Common Pleas for the Eleventh Judicial District of Pennsylvania, which district is co-extensive with Luzerne County.  The compensation paid to petitioner as judge was $ 12,000 per year.  At the time of his appointment, petitioner agreed to be a candidate for the full 10-year term beginning January 1, 1940.  He was a candidate to succeed himself in both the primary and the general elections of 1939.  He was defeated in the general election.In order to get the support of the Democratic organization of Luzerne County, petitioner had to pay the amount "assessed" by the subcommittee of the Democratic Party.  Each of the candidates gave the treasurer authority to spend his contribution.  The expenditures from the fund were principally on behalf of all the candidates. In addition to such contributions made by petitioner in the amount of $ 8,000, he expended on his own behalf $ 5,017.27 for advertising, *214  traveling, and other expenses in connection with his campaign.  He received a contribution of $ 500 from his son for the purpose of defraying part of his campaign expenditures.All facts stipulated but not expressly found herein are incorporated by reference.OPINION.The sole issue of this proceeding is whether or not petitioner is entitled to a deduction for his "re-election expenses," either as a business expense, as a loss suffered in a transaction entered into for profit, or as a nontrade or nonbusiness expense.The Commissioner denied the deduction claimed in petitioner's return as a business expense on the ground that it was not an ordinary and necessary expense of carrying on a trade or business.  On brief, he contends that it is not deductible under any of the sections relied upon by petitioner.Petitioner first contends that he was a judge and was running for re-election. Thus, he contends that he was carrying on a trade or *740  business of being a judge and he should be allowed his "re-election expenses" as an expense of that trade or business.  He seeks to distinguish his case from David A. Reed, 13 B. T. A. 513; reversed on another*215  issue, 34 Fed. (2d) 263, which in turn was reversed sub nom. Lucas v. Reed, 281 U.S. 699">281 U.S. 699.However, the mere fact that petitioner was already an office holder and was running for re-election in no wise distinguishes the instant case from the Reed case, supra.  The expenses incurred had nothing whatever to do with the performance of petitioner's functions as a judge.  "Running for office of and within itself is not a business carried on for the purpose of a livelihood or profit, but is only preparatory to the actual deriving of income from a subsequent holding of the office, if elected." David A. Reed, supra, 524. See Charles H. McGlue, 45 B. T. A. 761, 769. Petitioner is not entitled to a deduction by virtue of section 23 (a) (1) (A), Internal Revenue Code, as amended.Petitioner's next contention is equally without merit.  He did not suffer a loss in a transaction entered into for profit so that he would be entitled to a deduction under section 23 (e) (2).  He spent the money to help win the election. If he had so won, he would have been a judge for *216  a term of 10 years at the fixed annual salary.  The salary was not paid to the judge for the winning of the election, but rather for the performance of the judicial functions of a judge.  No profit could inure to petitioner merely from winning the election; therefore it was not a "transaction entered into for profit."The last question to be decided is whether or not petitioner is entitled to a deduction for the amount of his campaign expenses as a nontrade or nonbusiness expenditure under section 23 (a) (2), Internal Revenue Code, as amended by section 121 (a) of the Revenue Act of 1942.  We say not.Our holding that petitioner was not engaged in a trade or business would not deny him the benefit of a deduction for expenses "paid * * * for the production or collection of income, or for the management, conservation or maintenance of property held for the production of income." However, we have no doubt that it was not within the intendment of Congress to allow such expenses to be deducted under this section.  See House Ways and Means Committee Report on Revenue Bill of 1942 at pages 74-76, and Senate Finance Committee Report at pages 87-88.  Also of interest is the statement of Mr. *217  Paul set forth at page 88 of volume 1 of the Hearings before the Ways and Means Committee.  The expenditures upon which petitioner bases his claim for a deduction under this section are personal in nature.  See George W. Lindsay, 34 B. T. A. 840. See also T. D. 5196, Internal Revenue Bulletin Dec. 14, 1942.Furthermore, the concept that the holding not only of a high judicial office but of any public office constitutes a trade or business or a *741  transaction entered into for profit is a contradiction of the basic ideology underlying the principles of our government.  Equally under the ban of public conscience and, hence, of public policy is the contention that expenditures made to promote one's candidacy for election to public office represent expenses "paid * * * for the production or collection of income, or for the management, conservation or maintenance of property held for the production of income."We hold that Congress did not intend that expenditures of the character here involved should be deductible.Decision will be entered for respondent.