DocketNumber: Docket No. 16357
Citation Numbers: 12 T.C. 921, 1949 U.S. Tax Ct. LEXIS 185
Judges: Arnold
Filed Date: 5/31/1949
Status: Precedential
Modified Date: 1/13/2023
*185
During the taxable year petitioner paid out $ 1,881 as court costs, attorney fees, and other expenses in connection with three libel suits that he brought against certain newspaper publishers for alleged libelous statements made against him as a candidate for circuit judge. Petitioner deducted the $ 1,881 as ordinary and necessary expenses of his law office.
*922 Respondent determined a deficiency in income and victory tax for 1943 in the sum of $ 306.57. Petitioner challenges respondent's determination upon the*186 ground that he is entitled to deduct as business expenses under
FINDINGS OF FACT.
Petitioner, a resident of Hillsboro, Missouri, filed his income tax return for 1943 with the collector of internal revenue for the district of Missouri.
In or about 1912 petitioner was admitted to the practice of law in Missouri and began practicing law in Hillsboro. In 1914 he was elected prosecuting attorney of Jefferson County, Missouri, and was reelected in 1916. In 1918 he was in the Army, returning to Hillsboro in 1919. In 1920 he was again elected prosecuting attorney for a two-year term. He continued his law practice in Hillsboro after his third term as prosecuting attorney. He also had an abstract business, was a director, vice president and president of the Bank of Hillsboro, and was a steward in the Methodist Church of Hillsboro.
In 1938 petitioner was a candidate for judge of the Circuit Court for the Twenty-first Judicial Circuit of Missouri. On November 7, 1938, the day before the election, a news article*187 was published by the St. Louis Globe-Democrat and two other newspapers regarding petitioner's candidacy and his conduct as a prosecuting attorney in his third term, 1920-1922. Petitioner was defeated at the election on November 8, 1938. Petitioner considered the news articles libelous and filed certain libel suits, three of which were
The petitions in the three suits alleged in part as follows:
That plaintiff [petitioner] was greatly injured [by the publications] * * * in the 21st judicial circuit and elsewhere where said newspapers were circulated and read; that as a result thereof he was defeated in the election for circuit judge; was greatly injured in the loss of his good name and the reputation he had previously borne, as a citizen, lawyer, banker and a churchman; that plaintiff has suffered great humiliation and shame by reason*188 of the publication of said article; that he has been brought in contempt and disgrace thereby and has suffered great mental pain and anguish and has been greatly damaged and injured in his profession, in his banking business and among the people of his church, and that all of the acts of defendants in publishing and procuring the publication of said libelous article were knowingly, intentionally and maliciously done for the purpose of injuring the plaintiff.
*923 In each case the verdict was for the defendant or defendants and against the plaintiff. In
During 1943 petitioner expended $ 1,881 in connection with the suits. He deducted the $ 1,881 in his 1943 income tax return, with the following explanation:
Court costs, attorney's fees, and other expenses in connection with three libel suits by taxpayer as plaintiff in circuit courts of Missouri, the Missouri Supreme Court and the United States Supreme Court.
In explaining his disallowance of the deduction*189 respondent stated that "such expenditures are considered personal."
The court costs, attorney fees, and other expenses paid out by petitioner in connection with the libel suits did not constitute ordinary and necessary expenses in carrying on his trade or business.
OPINION.
The code expressions "ordinary and necessary expenses" and "in carrying on any trade or business" are statutory concepts that have been construed by the courts on many occasions.
The expenditures in question were not made by petitioner to augment his law practice. The taxpayer's business and his conduct *924 thereof were not involved in the libel suits. Such suits involved an effort on his part to recoup in dollars the alleged damage to his personal reputation and good name "as a citizen, lawyer, banker, and a churchman." If he had spent an equal sum in acquiring or enhancing his reputation*191 and learning as a lawyer, he could not have deducted the expenditures as ordinary and necessary expenses of his business,
The libel suits were filed as the result of published statements made in the course of a political campaign. The expenditures were post-campaign, rather than campaign expenses. Petitioner could not have deducted the costs of his campaign for the judgeship as ordinary and necessary expenses,
In
There can be no doubt that the slanderous reports circulated by Wardrop were such as would tend to blacken the character or reputation of petitioner. This was a personal injury, however, and one for which, under the law, he was entitled to recover damages. The suit was not instituted by the corporation of which he was president, but by petitioner himself. In practically every case where slanderous reports are circulated about an individual and damage his character or reputation, such reports affect indirectly, and, to a certain extent, the business in which he is engaged. Any expense, however, incurred by him in defending his good name under such circumstances cannot be said to be
"Slander" has been defined to be "words falsely spoken, which are injurious to the reputation of another." Bouv. Law Dict. Vol. 3, page 3079. This definition indicates that when the slanderous words spoken are about the reputation of an *925 individual, such individual himself is the one who suffers the injury. Any damages recovered for such injury is recovered*194 by the individual. Applying this rule to the instant case, the injuries were suffered by the petitioner, and had he collected the amount of the judgment, such sum would have been his own private property and would have had no connection whatsoever with his business. * * *
To the same effect is
1. In its opinion the Supreme Court said:
"Reputation and learning are akin to capital assets, like the good will of an old partnership. Cf.