Brief Fact Summary. Petitioner worked for a company that went bankrupt. After receiving a job with another company he decided to pay off debts of the bankrupt company to extent that he was able in order to repair his credit and standing.
Synopsis of Rule of Law. In computing net income one may deduct ordinary and necessary expenses incurring in carrying on any trade or business.
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Issue. Are the expenses deductible as ordinary and necessary business expenses?
Held. Justice Cardozo issued the opinion for the Supreme Court of the United States in affirming the lower court and holding that the expenses are not deductible as ordinary and necessary business expenses.
Discussion. The Supreme Court found no evidence that these expenditures were ordinary or necessary in the world of business or in operating a business. Rather the Court found this to be an extraordinary circumstance and not commonly found or expected in any business.