Meyer J. Fleischman v. Commissioner

Brief Fact Summary. Petitioner and his wife entered into an antenuptial agreement. The agreement specified that in the event of divorce, Petitioner would pay $5,000 and his wife would release all interests in his property.

Synopsis of Rule of Law. All ordinary and necessary expenses paid or incurred during the taxable year producing or collecting income, or managing, conserving, or maintaining property held for the production of income are deductible.

Facts. Petitioner, Meyer J. Fleishman, entered into an ante-nuptial agreement with Joan Ruth Francis providing that in case of divorce Petitioner would pay Joan $5,000 in consideration for which Joan released all interest in Petitioner’s property. During the divorce, the wife sought Petitioner’s property. Petitioner did not deduct the legal fees for the divorce, but did deduct $3,000 for legal expenses incurred in defending the suit to invalidate the antenuptial agreement. The deduction was not allowed.

Issue. May Petitioner deduct legal expenses incurred in defending his wife’s lawsuit to set aside their ante-nuptial contract?

Held. Judge Simpson issued the opinion for the Tax Court in holding that Petitioner is not allowed to take the expenses as a deduction.

Discussion. If the claim could not have existed “but for the marriage relationship,” then the expense to defend it is a personal expense and not deductible. Marriage is clearly a personal in nature and defending your property incident to divorce does not fall within the rule.