Court Opinion

ID: 9460179
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:44:03.494286+00
Date Added: 2024-06-11T17:36:31.077140
License: Public Domain

CUMMINGS, Circuit Judge
(dissenting)-
The expense incurred was ordinary and necessary for the reasons stated in Judge Campbell’s dissenting opinion in Anderson v. Commissioner: “The taxpayer’s payment * * * was made to preserve his employment and to avoid injury to his business reputation * * * ” 480 F.2d 1304, 1309 (7th Cir. 1973). The majority in Anderson did not disagree with the dissent on this point; instead Anderson held that the rule of Arrowsmith v. Commissioner, 344 U.S. 6, 73 S.Ct. 71, 97 L.Ed. 6, required what might otherwise be ordinary expenses to be treated as a capital loss because, on the particular facts of that case, they were essentially a refund of a previous capital gain. The expense incurred here is not in the nature of a refund, and Arrowsmith is therefore inapplicable.
The Government also argues that no expense was incurred because the stock was sold at a price equal to the taxpayer’s basis. The taxpayer is entitled to a deduction based on the fair market value of the property transferred, but he must also recognize the long-term capital gain implicit in disposition of the property. United States v. General Shoe Corp., 282 F.2d 9 (6th Cir. 1960), certiorari denied, 365 U.S. 843, 81 S.Ct. 801, 5 L. Ed.2d 808; International Freighting Corp., Inc. v. Commissioner, 135 F.2d 310 (2d Cir. 1943). Since the Government has not counterclaimed for the capital gains tax, that issue is not before us. Accordingly, I would allow the deduction as claimed.