Brief Fact Summary. Taxpayer purchased 4000 shares of common stock in Montgomery Ward. He and other stockholders were concerned with the direction of the company and formed a committee to advocate for change. Taxpayer spent $17,000 in support of the committee’s activities.
Synopsis of Rule of Law. Ordinary and necessary business expenses for the management, conservation, or maintenance of property held for the production of income may be deductible.
He certainly thought they were, and we should be slow to override his judgment.View Full Point of Law
Issue. Is the expense allowable as a business deduction?
Held. Chief Judge Tuttle issued the opinion for the United States Fifth Circuit Court of Appeals in reversing the lower court and holding the expenditure is deductible.
Discussion. Taxpayer made the payments anticipating that profit would result. Further, there was success from the work of the committee. Taxpayer was clearly expending money in order to protect his business investment.