Howard v. Comm'r of Internal Revenue
| Decision Date | 24 January 1951 |
| Docket Number | 23168.,Docket Nos. 20860 |
| Citation | 16 T.C. 157 |
| Parties | LINDSAY C. HOWARD, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
A. Calder Mackay, Esq., for Adam Y. Bennion, Esq., for the petitioner.
H. A. Melville, Esq., for the respondent.
1. Expenses for legal fees and costs incurred in a Court Martial proceeding against petitioner were deductible from income of petitioner.
2. Expenses incident to defense of an action brought by his divorced wife to collect payments of money awarded the divorced wife in a divorce action are not deductible from income of petitioner.
3. Depreciation on a ranch house, the sole use of which was the occasional occupancy by petitioner and his family, held, not allowable as a business deduction.
The respondent determined deficiencies in petitioner's tax liability as follows:
+---------------+
¦1943¦$6,204.99 ¦
+----+----------¦
¦1944¦3,439.12 ¦
+----+----------¦
¦1945¦2,077.84 ¦
+----+----------¦
¦1946¦5,185.25 ¦
+---------------+
The issues arose from the disallowance by respondent of certain deductions as business expenses for legal fees and of depreciation on petitioner's ranch house and its furnishings. Other adjustments will be made in the recomputation consequent hereon. Part of the facts were stipulated, the stipulation being incorporated herein by reference.
Petitioner is an individual with a residence in Beverly Hills, California. The returns for the periods involved (excepting 1943) were filed with the collector of internal revenue for the sixth district of California.
Petitioner and Anita Z. Howard were married June 1, 1925. On August 23, 1938, they executed a property settlement agreement providing, in part, that the petitioner would pay to Anita Z. Howard during her natural life, or until she remarried, a monthly sum of $1,250, commencing August 1, 2938. On November 5, 1938, Anita Z. Howard was granted a final divorce by a decree of the Second Judicial District Court of the State of Nevada in and for the County of Washoe, which decree approved, ratified and adopted in its entirety, the property settlement agreement of the parties and expressly ordered and adjudged that the covenants therein contained should be performed.
Petitioner made the payments to Anita Z. Howard of $1,250 per month, as specified in the property settlement agreement, from August 1938 through the calendar year 1941, and then discontinued such payments.
Thereupon, Anita Z. Howard commenced an action against petitioner in the Superior Court of the State of California in and for the City and County of San Francisco, to recover the monthly payments alleged to be due her under the terms of the property settlement agreement, and praying that the Nevada decree be established as a foreign judgement and enforced by order of the California court.
Petitioner filed an ‘Answer and Cross-Complaint‘ in the action, denying liability upon two grounds:
a. That Anita Z. Howard had remarried under common law and hence his obligation to make monthly payments had terminated under the terms of the property settlement agreement; and
b. That the property settlement agreement was null and void, having been procured by the fraud and deceit of Anita Z. Howard, in that during their married life, and prior to the execution of the agreement, she had represented to petitioner that she had been a faithful wife, whereas in truth and fact for 4 years prior to the execution of the agreement she had been an unfaithful wife to plaintiff, unbeknownst to him.
The cross-complaint prayed for the cancellation and annulment of the property settlement agreement and that portion of the decree of the Nevada court which purported to approve and adopt the same.
Anita Z. Howard filed a demurrer to the Answer and Cross-Complaint, which was sustained by the Superior Court. The decision was reversed by the District Court of Appeal, First District, Division 2, California, on April 24, 1945, in Howard v. Howard, 157 Pac.(2d) 874, but was affirmed by the Supreme Court of California on November 27, 1945, in Howard v. Howard, 163 Pac.(2d) 439. The opinions by the District Court of Appeal and the Supreme Court of California, and the facts set forth therein were, by stipulation of the parties, incorporated herein and made a part hereof.
Petitioner was commissioned a Captain in the United States Army Reserve on or about April 27, 1942, and in March 1944, while still a Captain, was released from active duty as a reserve officer for medical reasons. He was not awarded disability retirement benefits. On or about November 20, 1943, a General Court Martial was appointed to try petitioner on the charge of Conduct Unbecoming an Officer and a Gentleman, the specification of the alleged violation being that he—
* * * did, without due cause, from about 1 January 1942, to about 17 November 1943, dishonorably fail, refuse, and neglect to pay to Anita Zabala Howard, divorced wife of said Captain Lindsay C. Howard, the sum of One Thousand Two Hundred Fifty ($1,250.00) Dollars per month as and for the support of said Anita Zabala Howard, which sum the said Captain Lindsay C. Howard was ordered to pay by a valid decree, dated 5 November 1938, rendered by a court of competent jurisdiction in the case of Anita Zabala Howard, Plaintiff, versus Lindsay C. Howard, Defendant, same being Cause No. 60623, in the Second Judicial District Court of the state of Nevada, in and for the County of Washoe, Nevada.
As attorneys' fees, expenses and court costs in the Court Martial proceedings and in the litigation in the Superior Court, District Court of Appeal, and Supreme Court of California, petitioner paid the following amounts:
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...467, 64 S.Ct. 249, 88 L.Ed. 171; Draper v. Commissioner, 1956, 26 T.C. 201; Salt v. Commissioner, 1952, 18 T.C. 182, and Howard v. Commissioner, 1951, 16 T.C. 157, affirmed on other grounds, 9 Cir., 1953, 202 F.2d 28, the petitioner urges that expenses incurred to protect a trade or busines......
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