Dyer v. CIR

• Decision Date: 01 December 1965
• Docket Number: No. 17892.,17892.
• Citation: 352 F.2d 948
• Parties: J. Raymond DYER and Jean Russell Dyer, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

352 F.2d 948 (1965)

J. Raymond DYER and Jean Russell Dyer, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 17892.

United States Court of Appeals Eighth Circuit.

December 1, 1965.

J. Raymond Dyer, St. Louis, Mo., for petitioners.

Harold K. Wilkenfeld, Atty., Dept. of Justice, Washington, D. C., for respondent. Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Gilbert E. Andrews and Robert A. Bernstein, Attys., Dept. of Justice, Washington, D. C., were on the brief.

Before MATTHES and BLACKMUN, Circuit Judges, and REGISTER, District Judge.

BLACKMUN, Circuit Judge.

J. Raymond Dyer (whom we shall call the taxpayer) and his wife petition for review of a Tax Court decision that there are deficiencies in their cash basis income taxes as jointly returned for the calendar years 1958 and 1959. The deficiencies amount to $417.04 and $362.19, respectively. Judge Black's opinion, not reviewed by the full court, is T.C. Memo 1964-200.

The challenged amounts are attributable to asserted deductions for numerous small expenditures incurred with respect to nine separate "controversies" with Union Electric Company and with the Securities and Exchange Commission. The parties have submitted substantial briefs in support of their respective positions. Judge Black, in his memorandum of 28 pages, has detailed the facts.

The question is whether the expenditures are deductible under § 162(a) of the 1954 Code, 26 U.S.C.A. § 162(a), as "ordinary and necessary expenses paid * * * in carrying on any trade or business", or, with respect to certain of them, under § 212 of the Code as ordinary and necessary expenses paid "for the production or collection of income", or, in contrast, are personal expenses which, under § 262, are not deductible.

Union in 1958 and 1959 had outstanding more than 500,000 shares of voting preferred stock and more than 10,000,000 shares of voting common. Its common shareholders exceeded 60,000.

Taxpayer is a Saint Louis attorney. His daughter Nancy, born in October 1936, owned 100 shares of Union common which the taxpayer had purchased for her in April 1956. Nancy's father represented her under power of attorney and, during her minority, as guardian. Taxpayer acquired 250 shares of Union common in his own right in January 1957.

The nine controversies may perhaps be described as follows:

Controversy A was a state court suit instituted in 1956 by Nancy, through the taxpayer as her next friend, against Union and others for the right to copy Union's stock list and for three $250 statutory penalties (under Mo.Rev.Stat. § 351.215 (1949)) because of denials of that right. This proved unsuccessful. State ex rel. Dyer v. Union Elec. Co., 309 S.W.2d 649 (Mo.App.1958). However, during the suit's pendency, Union did allow Nancy personally to have the copying privilege anyway. She exercised that privilege in part but was not able at the time to complete her copying.

Controversy B was a 1957 state court action brought by the taxpayer, as Nancy's natural guardian, against Union and others for like statutory penalties and for specific performance of an alleged agreement by which Union consented to let the taxpayer, as guardian, copy its stock list. This suit was also unsuccessful. Dyer v. Union Elec. Co., 318 S.W.2d 401 (Mo.App.1958).

Controversy C was a state court mandamus action by taxpayer and by Nancy, through taxpayer as next friend. It was brought against Union and its proxy agents to compel the issuance, for Union's 1957 annual meeting, of revised proxy cards containing bylaw changes proposed by the plaintiff shareholders and to enjoin the agents from voting proxy cards not containing those changes, and for a reasonable attorney's fee. This was unsuccessful. State ex rel. Dyer v. Union Elec. Co., 312 S.W.2d 151 (Mo.App.1958).

Controversy D concerned a petition, filed in this court by taxpayer and Nancy, to review a March 1957 order of the SEC permitting Union's 1957 proxy material to become effective, and the petitioners' application for a stay of that order. Union intervened. This court denied the relief requested. Dyer v. SEC, 251 F.2d 512 (8 Cir. 1958). Certiorari was granted, however, and the case remanded for further consideration. 359 U.S. 499, 79 S.Ct. 1115, 3 L.Ed.2d 976. Half the certiorari costs were taxed against Union. 361 U.S. 803, 80 S.Ct. 40, 4 L.Ed.2d 52. The remanded case was argued and submitted in 1959. Eventual decision on the merits went against the petitioners. Dyer v. SEC, 287 F.2d 773 (8 Cir. 1961).

Controversy E was a federal suit instituted by the SEC against the taxpayer for injunctive relief with respect to what was claimed to be his solicitation of proxies for Union's 1957 meeting without first complying with a February 1957 Commission order requiring approval of declarations. The taxpayer counterclaimed with a request that the Commission be ordered to make a specified investigation. The district court eventually dismissed the counterclaim for lack of jurisdiction and also dismissed the Commission's complaint for mootness. SEC v. Dyer, 22 F.R.D. 229 (E.D. Mo.1958). Nine months later this court issued its decision concerning proxy solicitation for Union's 1958 meeting, Dyer v. SEC, 266 F.2d 33 (8 Cir. 1959), cert. denied 361 U.S. 835, 80 S.Ct. 86, 4 L.Ed.2d 75, rehearing denied 361 U.S. 911, 80 S.Ct. 253, 4 L.Ed.2d 181, referred to below. The district court, accordingly, then vacated its order which, in the 1957 case, had dismissed the Commission's complaint for mootness and, instead, granted injunctive relief for the Commission on the merits. SEC v. Dyer, 180 F.Supp. 903 (E.D.Mo.1959). Later this court vacated that decree because of excessive breadth. We remanded the case, however, with directions to dismiss the Commission's complaint for mootness; we also affirmed the dismissal of the counterclaim. Dyer v. SEC, 291 F.2d 774 (8 Cir. 1961).

Controversy F centered in Union's 1958 annual meeting. Union filed its declaration with the SEC, as required by an order the Commission had issued. This included some but not all of a number of proposals submitted to Union by taxpayer and Nancy. The Commission held a hearing in Washington and issued orders. Taxpayer attended that hearing. The taxpayer and Nancy filed with this court their petitions for review of those SEC orders and for a stay. Another shareholder, represented by the taxpayer, and Union were both permitted to intervene. Stay was denied and the 1958 meeting was held in due course. Later this court upheld the SEC orders. Dyer v. SEC, supra, 266 F.2d 33 (8 Cir. 1959).

Controversy G concerned Union's 1959 annual meeting and Union's declaration of proxy material. Again the SEC held hearings. The taxpayer and Nancy participated. The Commission issued its order permitting Union's declaration to become effective. The taxpayer and Nancy filed with this court their petition for review and for a stay. Union intervened. Stay was denied. The review was decided adversely to the petitioners. Dyer v. SEC, 289 F.2d 242 (8 Cir. 1961).

(Controversy H was an unemployment compensation matter in which the taxpayer represented the claimant. Apparently it had nothing to do with Union or the SEC. At the Tax Court trial the Commissioner conceded the deductibility of expenditures claimed by the taxpayer with respect to that controversy).

Controversy I concerned Union's rates. In 1958 Union proposed increases and filed schedules with the Public Service Commission of Missouri. Hearings ensued. The taxpayer and Nancy intervened in opposition as domestic consumers. In July 1959 the Commission approved the increases. The taxpayer and Nancy sought a rehearing and then court relief. Union intervened. The petitioners were not successful. State ex rel. Dyer v. Public Serv. Comm'n, 341 S.W.2d 795 (Mo.Sup.1961), cert. denied 366 U.S. 924, 81 S.Ct. 1351, 6 L.Ed.2d 384.

Controversy J had to do with the issuance by Union of additional common shares. The SEC approved Union's declaration and denied a request by the taxpayer and Nancy for a hearing. The two then filed with this court their petition for review and for a stay. Union and two of its other shareholders, one represented by the taxpayer, were granted leave to intervene. The attack asserted preemptive rights in those shares which were not subscribed for on the offering and which Union proposed then to issue to employees at a discount. Stay was denied. The petition for review was unsuccessful. Dyer v. SEC, 290 F.2d 534 (8 Cir. 1961).

The expenses paid by the taxpayer and which remain disallowed as deductions by the Commissioner and by the decision of the Tax Court were incurred, as we have said, in connection with these several controversies (other than H). They consist of certification and filing fees, court costs, expenses of transcripts, and briefs, and those of travel, stenographic, telephone, telegraph, stationery, auditing, photostating, multilithing, notary and postage charges, and the like.

At this point, for what it may be worth, we note the following:

1. The case of J. Raymond Dyer, 36 T.C. 456 (1961), which concerned the taxpayer and Mrs. Dyer's jointly returned income tax for the calendar year 1957. At issue were claimed deductions for business expenses, the expenses of prosecuting a libel suit against a Saint Louis newspaper, and travel and mimeographing expenses incurred in connection with hearings before the Joint Committee on Atomic Energy. The Commissioner had disallowed the deductions on the ground that the expenses were "disbursed by you for a fight and/or crusade by you and your daughter, Nancy Corinne Dyer, over proxies of Union Electric Company". The Tax Court, in an opinion also written by Judge Black, held that some of the claimed business expenses were not attributable to the proxy contest and were allowable; that that portion incurred in the proxy contest was not deductible under § 162 and § 212 of the 1954 Code; that the libel suit expenses were...