WELCH V. HELVERING
290 U.S. 111 (1933)
NATURE OF THE CASE: This was a dispute over the status of the repayment of a bankrupt
corporation's debt.
FACTS: Welch (P) was the secretary of E.L. Welch Company engaged in the grain business.
The corporation was eventually determined to be bankrupt. P then made a contract with
Kellogg to purchase grain for it on commission. To reestablish relations with customers who
he had known in acting for the Corporation, P decided to pay the debts of that company in
order to establish standing and credit. During the next years, P made substantial repayments
that are detailed in the Freeland book 12th edition page 316 bottom paragraph. The IRS ruled
that these payments were not deductible from income as ordinary and necessary expenses but
were capital expenditures; the outlay for reputation and good will. This decision was
affirmed along the way and the Supreme Court granted certiorari.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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