Court Opinion

ID: 3811406
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:49:55.359453+00
Date Added: 2024-06-11T07:38:16.101468
License: Public Domain

I cannot agree that the taxpayer is entitled to the claimed deduction as "ordinary and necessary expenses * * * in carrying on any trade or business * * *."
From the evidence and the stipulation of the parties it appears that the expenditure for which the taxpayer claims a deduction was made by the taxpayer in settlement of a claim by a third person for damages resulting to that person from the acts of certain individuals conspiring to deprive the third person of some of his franchises and business and giving them over to the taxpayer, a corporation subsequently formed by the alleged conspirators.
In Deputy et al. v. DuPont, 60 S.Ct. 363, 84 L.Ed. ___, decided January 8, 1940, it is said:
"* * * Allowance of deductions from gross income does not turn on general equitable considerations. It 'depends upon legislative grace; and only as there is clear provision therefor can any particular deduction be allowed.' New Colonial Ice Co., Inc., v. Helvering, 292 U.S. 435, 440, 54 S.Ct. 788. And when it comes to construction of the statutory provision under which the deduction is sought, the general rule that 'popular or received import of words furnishes the general rule for the interpretation of public laws,' Maillard v. Lawrence, 16 How. 251, 261, is applicable."
It cannot be said that the transaction resulting in the taxpayer's expenditure was an "ordinary" one in the conduct of its business.
"Ordinary has the connotation of normal, usual, or customary. To be sure, an expense may be ordinary though it happen but once in the taxpayer's lifetime. Cf. Kornhauser v. United States, 276 U.S. 145, 48 S.Ct. 219. Yet the transaction which gives rise to it must be of common or frequent occurrence in the type of business involved." Deputy v. DuPont, supra. See, also, Welch v. Helvering, 290 U.S. 111, 54 S.Ct. 8.
That the taxpayer's payment may have been beneficial to it or necessary for its continued existence are not grounds for allowance of the payments as deductions. Dalton v. Bowers,287 U.S. 404, 53 S.Ct. 205; Welch v. Helvering, supra.
Furthermore, the expenses for which a deduction can be allowed under the statute must be both necessary and ordinary.
Welch v. Helvering, supra; Deputy v. DuPont, supra.
The Tax Commission has found that the expenses for Which a deduction is claimed were not ordinary and necessary in carrying on the taxpayer's business. In my opinion the evidence sustains that finding, and its order denying the deduction should be sustained.