Court Opinion

ID: 4479574
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:13:45.331263+00
Date Added: 2024-06-11T15:03:32.690143
License: Public Domain

MüusoNEr, J., dissenting: It may be argued that contracts to pay witnesses, contingent upon recovery, would be unenforceable on the grounds of public policy, and that generally payments pursuant to such contracts should not be deductible from income as ordinary and necessary business expense. However, I feel the application of such a general rule is or should be subject to some exceptions. “[E]ach case should depend upon its peculiar circumstances.” Commissioner v. Heininger, 320 U.S. 467. I feel that here it fairly appears that the contingency arrangement for the attorney and witnesses was not initiated but merely acquiesced in by petitioner. Where the special facts and circumstances show enforcement is by deduction from the recovery, which recovery is admittedly taxable income to the taxpayer,1 and where he has no choice but submit to the contract or abandon the recovery attempt, I feel the deduction should be allowed. After all, under the special facts and circumstances here, public policy was about as well served by exposing the UMWA conspiracy, as it would be if the innocent victim of the criminal conspiracy had rejected the terms forced upon him by those who were in a position to testify or not as they saw fit. I feel under the special facts and circumstances present in this case the payments actually made to the witnesses should be allowed as ordinary and necessary 'business expenses.  The circumstance that, without the litigation expenditure there would have been no income to tax, was held conclusive on the issue of ordinary and necessary expense in the opinion of the Seventh Circuit in Heininger v. Commissioner, 133 F. 2d 567.