Kornhauser v. United States
| Decision Date | 20 February 1928 |
| Docket Number | No. 162,162 |
| Citation | 48 S.Ct. 219,72 L.Ed. 505,276 U.S. 145 |
| Parties | KORNHAUSER v. UNITED STATES |
| Court | U.S. Supreme Court |
Mr. L. L. Hamby, of Washington, D. C., for petitioner.
[Argument of Counsel from page 146 intentionally omitted] The Attorney General and Messrs. Wm. D. Mitchell, Sol. Gen., and Sewall Key, both of Washington, D. C., for the United States.
[Argument of Counsel from pages 147-150 intentionally omitted] Mr. Justice SUTHERLAND delivered the opinion of the Court.
The petitioner sued in the Court of Claims to recover $1,126.15, the amount by which his income tax for the year 1918 was increased by reason of the refusal of the Commissioner of Internal Revenue to allow a deduction from petitioner's gross income of the sum of $10,000 claimed as a business expense for that year. The petition alleges that the latter sum was paid by petitioner for attorney's fees incurred in the defense of a suit against him for an accounting instituted by his former copartner, said suit growing directly out of the conduct of the partnership business, it being alleged by the copartner that petitioner had collected fees or compensation for professional services performed during the existence of the partnership to a division of which the copartner was entitled; that the alleged fees in fact consisted of stock in a corporation acquired subsequently to the dissolution of the partnership and not for services performed during its existence; that the defense to the suit was successful and the amount paid was a necessary expense incurred in connection with petitioner's business within the meaning of section 214(a), subd. 1, of the Revenue Act of 1918 (Comp. St. § 6336 1/8 g), or a loss within the meaning of subdivision 4 of the same section; that a claim for refund of the excessive tax was duly made to the Commissioner and by him rejected. To this peti- tion a demurrer was interposed and by the court below sustained, and the petition dismissed, on the ground that the expenditure was not an allowable deduction under either provision of the statute, but was a personal expense under section 215(a) of the Revenue Act of 1918 (Comp. St. § 6336 1/8 gg). 62 Ct. Cl. 647.
We think it is obvious that the expenditure is not a loss; and the only provisions of the Revenue Act (40 Stat. 1057, 1066, 1069, c. 18), which need be considered, are section 214(a), subd. 1, which reads:
'(1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, * * *'
-and section 215(a) which provides:
'(a) Personal, living, or family expenses.'
On the case made by the petition the expenditure in question was either a personal expense or a business expense; it was not a living or family expense. And it was an 'ordinary and necessary' expense, since a suit ordinarily and, as a general thing at least, necessarily requires the employment of counsel and payment of his charges. The petition is not as...
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