Court Opinion

ID: 4497849
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:15:38.615579+00
Date Added: 2024-06-11T14:54:15.507072
License: Public Domain

Smith,
dissenting: The Revenue Acts of 1934 and 1936 permit the deduction from gross income of “All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered.”
Article 23 (a)-9 of Regulations 86 and 94 provides in part as follows:
Art. 23 (a)-9. Pensions — Compensation for injuries. — Amounts paid by. a taxpayer for pensions to retired employees or to their families or others dependent upon them, or on account of injuries received by employees, and lump-sum amounts paid or accrued as compensation for injuries, are proper deductions as ordinary and necessary expenses. Such deductions are limited to the amount not compensated for by insurance or otherwise. * * *
*1186One of the petitioner’s officers became ill in 1934. The petitioner’s officers, believing that his illness would be only temporary, continued to pay him a salary at a reduced rate ($2,400 per annum). The petitioner’s president testified that during the taxable years the ill officer:
* * * was a valuable employee, and be bad been paid a small salary in tbe past years that be bad been working, and didn’t have any particular amount of money saved, or didn’t accumulate anything, and we wanted bis good will, and we wanted bim to come back to work, when and if be did recover. We thought, in fairness to bim and in the interest of tbe business, we should continue these payments of $2,400.
I think that these payments constituted ordinary and necessary expenses of carrying on a trade or business within the intendment of the statute and the Commissioner’s regulations. I can not believe that the respondent would have disallowed the deduction of the salary paid if he had had before him the evidence before the Board in this record.
Black, and Leech agree with this dissent.