United States v. Pyne, No. 683

• Court: United States Supreme Court
• Writing for the Court: BLACK
• Citation: 61 S.Ct. 893,85 L.Ed. 1231,313 U.S. 127
• Decision Date: 28 April 1941
• Docket Number: No. 683
• Parties: UNITED STATES v. PYNE et al

313 U.S. 127 61 S.Ct. 893 85 L.Ed. 1231 UNITED STATES

v.

PYNE et al.

No. 683. Argued April 2, 1941. Decided April 28, 1941.

Messrs. Robert H. Jackson, Atty. Gen., and Arnold Raum, of Washington, D.C., for petitioner.

Mr. Allen G. Gartner, of Washington, D.C., for respondents.

Page 128

Mr. Justice BLACK delivered the opinion of the Court.

The question presented is whether upon this record the Court of Claims¹ committed error in concluding that respondents, as executors, were, in computing their federal income tax, entitled to deduct expenses properly incurred in the administration of an estate, Congress having provided that such a deduction could be taken only by individuals, estates, or trusts engaged in 'carrying on * * * business.' Revenue Act of 1934, §§ 23(a), 161, 162, 26 U.S.C.A. Int.Rev.Code, §§ 23(a)(1), 161, 162. Compare City Bank Farmers Trust Co. v. Helvering, just announced, 313 U.S. 121, 61 S.Ct. 896, 85 L.Ed. —-.

In computing the 1934 net income of the estate, respondents claimed a deduction of $40,000 for fees paid to the estate's attorney during the taxable year. The Com-

Page 129

missioner of Internal Revenue disallowed the deduction; the respondents paid under protest, and filed suit for refund in the Court of Claims. Their complaint alleged that 'The payment of attorney's fees and the claim for allowance thereof as a deduction from gross income is predicated upon the contention that the tremendous size of the corpus of the estate and the proper administration thereof constituted the operation of a business and the employment of an attorney as counsel to guide the executors in the handling of the affairs of the estate was just as much a necessary expense of the estate as is incurred in the operation of any commercial business engaged in the manufacturing or selling of commodities.' The court made detailed findings of fact, and as its single conclusion of law stated that the respondents should recover.

We recently stated in Higgins v. Commissioner, 312 U.S. 212, 61 S.Ct. 475, 85 L.Ed. —-, that determination of what amounts to carrying on business requires examination of the facts in each case. In this case, the record before us contains the findings of the Court of Claims, a conclusion of law, and an opinion summarizing the findings of fact and indicating the reasons which prompted the court to reach its conclusion of law. The most that can be said of the findings of fact is that the court was of the opinion that the facts found showed that the activities of the executors were such as to meet certain criteria set out in the opinion as determinative of what constituted carrying on business. For what the court found as a fact was that the decedent, prior to his death 'was engaged in business as a financier and investor, maintaining an office where he employed an office manager and an average of six clerks. * * * In general the operations of the estate continued in substantially the same manner after the decedent's death as before * * *.' (35 F.Supp. 83.) In addition the court found that the...