Dyer v. Comm'r of Internal Revenue
| Decision Date | 31 May 1961 |
| Docket Number | Docket No. 82560. |
| Citation | 36 T.C. 456 |
| Parties | J. RAYMOND DYER AND JEAN RUSSELL DYER, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
J. Raymond Dyer, pro se.
William J. McNamara, Esq., for the respondent.
1. On their return petitioners claimed as deductions.$11,558.52 as business expenses. Of these claimed deductions, the Commissioner in his deficiency notice has allowed various items aggregating $1,504.75 and has disallowed items aggregating $10,053.77 as having been incurred by petitioner J. Raymond Dyer in a proxy fight over proxies sought by Union Electric Company of St. Louis, Missouri, of which petitioner was a stockholder. Held, not all of the $10,053.77 disallowed by the Commissioner was for expense incurred in the proxy contest. Held, further, that those expenditures which were so incurred are not deductible under sections 162 or 212, I.R.C. 1954.
2. In the taxable year petitioner J. Raymond Dyer incurred certain expenses in a libel suit which he brought against a St. Louis newspaper on the ground that a news article which it published and an editorial based thereon were libelous of his reputation as a lawyer. Held, such expenses are deductible as business expenses under section 162 of the 1954 Code.
3. In the taxable year petitioner and his minor daughter gave testimony in hearings before the Joint Committee on Atomic Energy in Washington, D.C., and incurred certain traveling expenses in connection therewith. Petitioner also incurred certain expenses for mimeographing copies of their testimony. Held: such expenditures are not deductible under either section 162 or section 212, I.R.C. 1954. They were personal expenses and not deductible under any applicable statute.
The Commissioner has determined a deficiency in petitioners' income tax for the year 1957 of $958.36. The deficiency is due to one adjustment which the Commissioner has made to the $4,336.36 loss which petitioners showed on their return for 1957. That adjustment is ‘(a) Business expenses disallowed $10,053.77’ and is explained in the deficiency notice as follows:
(a) On your return for the taxable year 1957 you deducted.$11,558.52 for alleged business expenses. Of the total amount claimed, $10,053.77 has been disallowed, as reflected by the following schedule:
+----------------------------------------------------------------------+
¦ ¦Deducted on¦Allowed ¦Disallowed¦
+-------------------------------------+-----------+---------+----------¦
¦ ¦return ¦ ¦ ¦
+-------------------------------------+-----------+---------+----------¦
¦Labor ¦$865.10 ¦ ¦$865.10 ¦
+-------------------------------------+-----------+---------+----------¦
¦Stationery ¦572.52 ¦$172.17 ¦400.35 ¦
+-------------------------------------+-----------+---------+----------¦
¦Telephone ¦169.16 ¦126.36 ¦42.80 ¦
+-------------------------------------+-----------+---------+----------¦
¦Postage ¦1,158.15 ¦58.15 ¦1,100.00 ¦
+-------------------------------------+-----------+---------+----------¦
¦Filing and service fees ¦233.20 ¦21.00 ¦212.20 ¦
+-------------------------------------+-----------+---------+----------¦
¦Microfilm and IBM cards and envelopes¦5,320.30 ¦ ¦5,320.30 ¦
+-------------------------------------+-----------+---------+----------¦
¦Brief printing ¦1,260.47 ¦ ¦1,260.47 ¦
+-------------------------------------+-----------+---------+----------¦
¦Travel expense ¦570.50 ¦ ¦570.50 ¦
+-------------------------------------+-----------+---------+----------¦
¦Transcripts and books ¦299.45 ¦17.40 ¦282.05 ¦
+-------------------------------------+-----------+---------+----------¦
¦Rent ¦570.00 ¦570.00 ¦ ¦
+-------------------------------------+-----------+---------+----------¦
¦Depreciation ¦359.62 ¦359.62 ¦ ¦
+-------------------------------------+-----------+---------+----------¦
¦Bar, library, Assn. dues ¦127.00 ¦127.00 ¦ ¦
+-------------------------------------+-----------+---------+----------¦
¦Photos, photostats ¦40.85 ¦40.85 ¦ ¦
+-------------------------------------+-----------+---------+----------¦
¦Court parking ¦5.20 ¦5.20 ¦ ¦
+-------------------------------------+-----------+---------+----------¦
¦Professional meetings ¦7.00 ¦7.00 ¦ ¦
+-------------------------------------+-----------+---------+----------¦
¦ ¦$11,558.52 ¦$1,504.75¦$10,053.77¦
+----------------------------------------------------------------------+
It is held that the amount of $10,053.77 was disbursed by you for a fight and/or crusade by you and your daughter, Nancy Corinne Dyer, over proxies of Union Electric Company, and are, therefore, not ordinary and necessary expenses in carrying on a trade or business. Moreover, such disbursements are not ordinary and necessary expenses for the production or collection of income or for the management, conservation, or maintenance of property held for the production of income. Accordingly, your taxable income as reported is increased in the amount of $10,053.77.
The petitioners by appropriate assignments of error contest the foregoing determination by the Commissioner.
Some of the facts have been stipulated and as stipulated are incorporated herein by this reference.
1. Jean Russell Dyer and J. Raymond Dyer, sometimes hereinafter referred to as petitioner, are husband and wife and reside in St. Louis, Missouri. They filed their joint Federal income tax return for the calendar year 1957 on the cash basis with the district director of internal revenue, St. Louis.
2. Union Electric Company, sometimes hereinafter referred to as Union, a Missouri corporation with offices at St. Louis, is a public utility holding company with more than 60,000 stockholders. Union's outstanding voting securities during the year 1957 consisted of approximately 533,500 shares of preferred stock and approximately 10,300,000 shares of common stock.
3. Petitioner's controversy with Union started on June 28, 1956, when on behalf of his minor daughter, Nancy Corinne Dyer, sometimes hereinafter referred to as Nancy, and at her request petitioner protested Union's participation in the publication of a nationwide full-page atomic reactor newspaper advertisement which was published on June 13, 1956. Petitioner had purchased 100 shares of Union stock for his daughter in April 1956.
4. On November 18, 1956, Union published a two-page advertisement in St. Louis newspapers carrying the report of its president, J. Wesley McAfee, relating to Union's lobbying activities in the State of Illinois. On November 19, 1956, petitioner, on behalf of his daughter-stockholder, protested the content of McAfee's letter to the stockholders. Copies of the protest were sent to the Securities and Exchange Commission and the Federal Trade Commission.
5. On December 11, 1956, petitioner, as attorney for Nancy, demanded access to Union's stocklist and the right to copy the stocklist. Union denied the validity of the power of attorney and refused the request, contending that under Missouri law a minor could not appoint an attorney.
6. On December 17, 1956, a petition for mandamus and damages was filed in the Circuit Court of the city of St. Louis by petitioner, as the duly appointed next friend of his daughter, against Union and three of its officers, McAfee, Ralph E. Moody, and E. J. Shapiro, to require production of certain books and records of the company for inspection and copy, and for statutory damages of $750. On December 21, 1956, the petition for mandamus was denied. This judgment was appealed to the St. Louis Court of Appeals on January 21, 1957, and was affirmed on February 4, 1958. During the year petitioner spent $177.69 in connection with the appeal for the filing fee and for transcript and brief costs. Petitioner in subsequent years was reimbursed for these expenditures by Nancy. Petitioner claims this $177.69 as a deduction.
7. Although the petition for mandamus was denied, Union, on December 21, 1956, accorded Nancy the right to copy the stocklist. She proceeded to make copies by microfilming until January 1, 1957, when she returned to Bryn Mawr College. On December 31, 1956, she requested Union's secretary to allow petitioner, as her natural guardian, to complete the microfilming of the stockholders list since she had to return to college. About three-fourths of the stockholders list had been microfilmed at this time. Her request was denied.
8. On or about January 3, 1957, petitioner filed a suit, as natural guardian for Nancy , in the Circuit Court of the city of St. Louis against Union; two of its officers, McAfee and Shapiro; and one of its directors, Moody, seeking specific performance of a contract alleged to have been made by Union's counsel that the company would recognize petitioner as natural guardian of Nancy and grant him inspection rights in such capacity. The suit also asked for the imposition of penalties against the individual defendants under section 351.215 of Vernon's Annotated Missouri Statutes for refusal of petitioner's request. The court dismissed the suit on November 13, 1957, and notice of appeal from such judgment to the St. Louis Court of Appeals was filed on January 17, 1958. During 1957, petitioner spent $74.45 for a filing fee and other costs in connection with this litigation.
9. On December 31, 1956, Nancy submitted to Union three proposed changes to the bylaws...
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