Coughlin v. Commissioner of Internal Revenue, 126

• Decision Date: 14 April 1953
• Docket Number: No. 126,Docket 22487.,126
• Parties: COUGHLIN v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Second Circuit

203 F.2d 307 (1953)

COUGHLIN v. COMMISSIONER OF INTERNAL REVENUE.

No. 126, Docket 22487.

United States Court of Appeals, Second Circuit.

Argued March 11, 1953.

Decided April 14, 1953.

H. Brian Holland, Asst. Atty. Gen., Ellis N. Slack, Lee A. Jackson and Robert N. Willan, Special Assts. to the Atty. Gen., for respondent.

David Boyd Chase, New York City, for petitioner.

Randolph E. Paul, New York City (Louis Eisenstein and Julian N. Stern, New York City, of counsel), for American Medical Ass'n, as amicus curiae.

George E. Cleary, New York City, for New York State Bar Ass'n, Section on Taxation, as amicus curiae.

Before AUGUSTUS N. HAND, CHASE and CLARK, Circuit Judges.

CHASE, Circuit Judge.

The petitioner has been a member of the bar for many years and in 1944 was admitted to practice before the Treasury Department. In 1946 he was in active practice in Binghamton, N. Y., as a member of a firm of lawyers there. The firm engaged in general practice but did considerable work which required at least one member to be skilled in matters pertaining to Federal taxation and to maintain such skill by keeping informed as to changes in the tax laws and the significance of pertinent court decisions when made. His partners relied on him to keep advised on that subject and he accepted that responsibility. One of the various ways in which he discharged it was by attending, in the above mentioned year, the Fifth Annual Institute on Federal Taxation which was conducted in New York City under the sponsorship of the Division of General Education of New York University. In so doing he incurred expenses for tuition, travel, board and lodging of $305, which he claimed as an allowable deduction under section 23(a) (1) (A) I.R.C., as ordinary and necessary expenses incurred in carrying on a trade or business and no question is raised as to their reasonableness in amount. The Commission disallowed the deduction and the Tax Court, four judges dissenting, upheld the disallowance on the ground that the expenses were non-business ones "because of the educational and personal nature of the object pursued by the petitioner."

The Tax Court found that the Institute on Federal Taxation was not conducted for the benefit of those unversed in the subject Federal taxation and students were warned away. In 1946, it was attended by 408 attorneys, accountants, trust officers, executives of corporations and the like. In 1947, over 1500 of such people from many states were in attendance. It was "designed by its sponsors to provide a place and atmosphere where practitioners could gather trends, thinking and developments in the field of Federal taxation from experts accomplished in that field."

Thus there is posed for solution a problem which involves no dispute as to the basic facts but is, indeed, baffling because, as is so often true of legal problems, the correct result depends upon how to give the facts the right order of importance.

We may start by noticing that the petitioner does not rely upon section 23(a) (2) which permits the deduction of certain non-trade or non-business expenses, but rests entirely upon his contention that the deduction he took was allowable as an ordinary and necessary expense incurred in the practice of his profession. The expenses were deductible under section 23(a) (1) (A) if they were "directly connected with" or "proximately resulted from" the practice of his profession. Kornhauser v. United States, 276 U.S. 145, 153, 48 S.Ct. 219, 220, 72 L.Ed. 505. And if it were usual for lawyers in practice similar to his to incur such expenses they were "ordinary." Deputy v. DuPont, 308 U.S. 488, 495, 60 S.Ct. 363, 84 L.Ed. 416. They were also "necessary" if appropriate and helpful. Welch v. Helvering, 290 U.S. 111, 54 S.Ct. 8, 78 L. Ed. 212. But this is an instance emphasizing how dim a line is drawn between expenses which are deductible because incurred in trade or business, i. e., because professional, and those which are non-deductible because personal. Section 24(a) (1) of Title 26.

The respondent relies upon T. R. 111, § 29.23(a)-15, which provides that "expenses of taking special courses or training" are not allowable as deductions under section 23(a) (2). But section 23(a) (2) concerns non-trade or non-business expenses. It is not necessary to decide...