BOWERS V. LUMPKIN
140 F.2d 927, cert. denied, 322 U.S. 755 (4th Cir. 1944)
NATURE OF THE CASE: This was a dispute over the deduction of legal fees to determine
title to stock.
FACTS: Lumpkin (P) had a life interest under a trust created by a will of her former
husband to 1/2 of the stock of a corporation that had the rights to distribute cola syrup in
South Carolina. P purchased the remaining stock of the corporation for $225,885 from the
trustees to whom it had been bequeathed to establish an orphanage. The Attorney General of
South Carolina instituted an action to invalidate the sale and to require P to account for
the profits. P defended the suit at a cost in excess of $27,000. P then deducted these
expenses from the tax years in question and they were denied by the IRS. P contends that
these expenses, under 121(a), were deductible as ordinary and necessary expenses for
carrying on a trade or business and were allowable as deductions from gross income. Under
the expanded rules P claimed that the property was held for production of income and the
money was spent in connection with that production.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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