Pyne v. United States, No. 44007.

• Court: Court of Federal Claims
• Writing for the Court: WHALEY, Justice, and LITTLETON, WHITAKER, and GREEN
• Citation: 35 F. Supp. 81
• Parties: PYNE et al. v. UNITED STATES.
• Docket Number: No. 44007.
• Decision Date: 07 October 1940

35 F. Supp. 81

PYNE et al.
v.
UNITED STATES.

No. 44007.

Court of Claims.

October 7, 1940.

35 F. Supp. 82

COPYRIGHT MATERIAL OMITTED

35 F. Supp. 83

Allen G. Gartner, of Washington, D. C., for plaintiff

Elizabeth B. Davis, of Washington, D. C., and Samuel O. Clark, Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D.C., on the brief), for defendant.

Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, and GREEN, Judges.

WHITAKER, Judge.

This case involves the right of the estate of Percy R. Pyne, deceased, in computing its income tax, to deduct attorney's fees and attorney's expenses from the gross income of the estate.

Supplement E of Title I of the Revenue Act of 1934, 48 Stat. 680, 727, 26

35 F. Supp. 84

U.S.C.A. Int.Rev.Code, § 161 et seq., provides for the taxation of the income of estates and trusts. Section 161 (a) under that supplement, 26 U.S.C.A. Int.Rev.Code, § 161 (a), provides: "The taxes imposed by this title chapter upon individuals shall apply to the income of estates or of any kind of property held in trust, * * *."

And Section 162, 26 U.S.C.A. Int.Rev. Code, § 162, provides: "The net income of the estate or trust shall be computed in the same manner and on the same basis as in the case of an individual, * * *" with certain exceptions not material here. Section 23 specifies the deductions from gross income allowable to an individual and, therefore, to an estate. Subsection (a), 26 U.S.C.A. Int.Rev.Code, § 23(a), permits the deduction of — "* * * All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; * * *."

Attorney's fees are, of course, ordinary and necessary expenses in carrying on a trade or business, and these attorney's fees are, therefore, deductible if the estate was engaged in carrying on a trade or business, and the attorney's fees were incurred in doing so.

The word "business," in the sense the word is used in the Revenue Act, is defined by Webster as — "That which busies, or engages time, attention, or labor, as a principal serious concern or interest. Specif. a Constant employment; regular occupation; work; * * * b any particular occupation or employment habitually engaged in, esp. for livelihood or gain."

And the Supreme Court in one of the early tax decisions under the Corporation Excise Tax Law of 1909 defined business as "`that which occupies the time, attention, and labor of men for the purpose of a livelihood or profit.' 1 Bouv. Law Dict. p. 273." Flint v. Stone Tracy Co., 220 U.S. 107, 171, 31 S.Ct. 342, 357, 55 L.Ed. 389, Ann.Cas. 1912B, 1312. Equally is it true that whatever engages the time, attention, and labor of men in order to conserve what they have or to avoid loss is likewise a business.

In Deputy, Administratrix, et al. v. Du Pont, 308 U.S. 488, 492, 60 S.Ct. 363, 366, 84 L.Ed. 416, certain expenses had been incurred by the respondent which he sought to deduct as ordinary and necessary expenses paid in carrying on his trade or business, which in that case he insisted was that of preserving his investment in the E. I. du Pont de Nemours and Company. The majority opinion stated:

"The district court concluded, on the basis of respondent's large and diversified investment holdings and his wide financial and business interests, that his business was primarily that of conserving and enhancing his estate. The petitioners challenge...