Legal expense

“ If this court is to take under review every dispute in which the Government and a taxpayer differ as to whether a given expenditure is an ordinary or an extraordinary expense of the taxpayer's business we shall be involved in the decision of myriad cases, each turning upon its own facts, without furnishing any light to the taxpayers for their future guidance. ”

“ The most elementary notion of justice would seem to require that services or property furnished upon the authority of the court or its officer, acting within his authority, for the common benefit of those interested in a fund administered by the court, should be paid from the fund as an 'expense of justice.' The Phebe, 1 Ware, 354, 359, Fed. ”

“ Ordinary in this context does not mean that the payments must be habitual or normal in the sense that the same taxpayer will have to make them often. A lawsuit affecting the safety of a business may happen once in a lifetime. The counsel fees may be so heavy that repetition is unlikely. None the less, the expense is an ordinary one because we know from experience that payments for such a purpose, whether the amount is large or small, are the common and accepted means of defense against attack. ”

“ Obviously what is an ordinary expense of a given business must depend upon the nature and scope of the business, the nature and occasion of the expenditure, and other considerations which will emerge in each specific case. ”

“ There is the same reason for making the expenses of prosecuting and conducting a suit for the enforcement of a contract, as for the recovery of damages for a trespass divested of every feature of aggravation, the legal compensation for the detention of a debt, is the amount due, interest and costs. Courts and juries can make no allowance for expenses incurred by withholding money justly due, however groundless or unjust the pretext for refusing payment may be. ”

“ The service may be, and often is, one that the taxpayer could not perform for itself, but if it is hired to build up its business, I see no reason why its proper cost is not a business expense deduction. ”

“ That uncertain and difficult test may be the best that can be devised to determine the tax treatment of costs incurred in litigation that may affect a taxpayer's title to property more or less indirectly, and that thus calls for a judgment whether the taxpayer can fairly be said to be 'defending or perfecting title.' Such uncertainty is not called for in applying the regulation that makes the 'cost of acquisition' of a capital asset a capital expense. ”

“ The policy is to credit against gross income the expenses of the business which begets earnings. The taxpayer is entitled to deduct that which he reasonably and in good faith expended in the effort to realize a profit. The revenue acts have always characterized deductible expenses as the ordinary and necessary expenses of the business, incurred and paid during the taxable year. The opinion assumes that the expenditure here in question was necessary in the conduct of the taxpayer's business but holds that it was not an ordinary expense of that business. ”

“ Ficker consulting it with a view to his own business, I asked him his opinion of the charges.
“Why,” said he, “the scale of fees is too large for the client and too small for the lawyer. But suitors object less to the amount than to the intricacies and perplexities of the Table. In some districts the expense of recovering a sum of money is one-third more than it is in others; though in both the same scale of fees is in operation. ”

“ If an expense is capital, it cannot be deducted as 'ordinary and necessary,' either as a business expense under § 162 of the Code or as an expense of 'management, conservation, or maintenance' under § 212. ”

“ To justify the exaction by a state of a money payment burdening interstate commerce, it must affirmatively appear that it is demanded as reimbursement for the expense of providing facilities, or of enforcing regulations of the commerce which are within its constitutional power. ”

“ Where the fees of court are precisely regulated and ascertained where they are paid all at once, at a certain period of every process, into the hands of a cashier or receiver, to be by him distributed in certain known proportions among the different judges after the process is decided and not till it is decided; there seems to be no more danger of corruption than when such fees are prohibited altogether. Those fees, without occasioning any considerable increase in the expense of a law-suit, might be rendered fully sufficient for defraying the whole expense of justice. ”

“ The poor defendant must pay his own expense. If an individual wishes to bring a case in court, why should he not pay his own expense? Why should the Federal Government bear the expense of a person whose statement may be true or which may not be true? I can foresee untold litigation. ”

“ The persons, however, who give occasion to this expense, are those who, by their injustice in one way or another, make it necessary to seek redress or protection from the courts of justice. The persons, again, most immediately benefited by this expense, are those whom the courts of justice either restore to their rights, or maintain in their rights. ”

“ Under petitioner's interpretation, the fundamental question whether an expense is properly characterized as a capital outlay which has to be amortized or instead as an ordinary business expense subject to immediate deduction would be answered by simple reference to accounting procedures in the industry. ”

“ The clearing was the principal improvement; and with regard to the defendant's claim to compensation therefor, the court said: 'The right of the defendant to be paid for the improvements by which the value of the premises was enhanced depends upon other provisions of law. It rests upon the broad principle of equity, that no man ought to enrich himself at the expense of another. ”

“ In no project originated by individuals, whether associated or otherwise, with a view to gain, are the municipal bodies named permitted to participate in such manner as to incur pecuniary expense or liability. ”

“ I do not suppose the taxpayer corporation can itself legally practice law or medicine, but I would suppose if it needed legal service for its business or thought it good business to supply medical attention to injured or ailing employees, the cost would be a business deduction, even though the agent was doing what the taxpayer could not legally do for itself. ”

“ The ordinance provided that the cost and expense of the condemnation of the property, including the compensation paid to the owners, the cost of the condemnation proceedings, the cost of advertising, and all other costs, and the interest on bonds issued, if any, should be assessed 'per front foot upon the property bounding and abutting on that part of Ivanhoe avenue, as condemned and appropriated herein.'-the assessments payable in 10 annual installments, if deferred, and the same collected as prescribed by law, and in the assessing ordinance thereafter to be passed. ”

“ The expense of the administration of justice, therefore, may very properly be defrayed by the particular contribution of one or other, or both, of those two different sets of persons, according as different occasions may require, that is, by the fees of court. It cannot be necessary to have recourse to the general contribution of the whole society, except for the conviction of those criminals who have not themselves any estate or fund sufficient for paying those fees. ”

“ It is settled by many decisions that a taxpayer may not accrue an expense the amount of which is unsettled or the liability for which is contingent, and this principle is fully applicable to a tax, liability for which the taxpayer denies, and payment whereof he is contesting. [5] Here the petitioner, in figuring its costs and its sales price to consumers, added the amount of the processing tax, but it collected its purchase price as such and designated no part of it as representing the tax. ”

“ We there said (pages 623, 624, 35 S.Ct. page 142) : 'In view of the many decisions of this court there can be no serious doubt that where a state at its own expense furnishes special facilities for the use of those engaged in commerce, interstate as well as domestic, it may exact compensation therefor. ”

“ The principal difference, as we see it, between the Court's opinion and the dissent lies in the weight to be given the findings of the trier of fact.↑ Justice Cardozo once described in memorable language the inquiry into whether an expense was an 'ordinary and necessary' one of a business: 'One struggles in vain for any verbal formula that will supply a ready touchstone. ”

“ We do not doubt the correctness of the District Court's finding that respondent embarked on this program to the end that his beneficial stock ownership in the du Pont Company might be conserved and enhanced. But that does not make the cost to him an 'ordinary' expense within the meaning of the Act. Ordinary has the connotation of normal, usual, or customary. To be sure, an expense may be ordinary though it happen but once in the taxpayer's lifetime. ”

“ The United States, recognizing and supporting these holdings, agrees with petitioner that costs that form 'an integral and essential element of the continuation of the business' are necessary expenses even though priority is not necessary to the continuation of the business. ”

“ Whether phrased as the payment of an expense in a business conducted for a principal by an agent or as a case where equity and reality r quire that the separate corporate identities be ignored or as the incurring under contract of a necessary expense, petitioner's argument for its success depends on the contention that Stages' operating deficit is an expense of petitioner's business. ”

“ The justice of demanding the special contribution is supposed to be evident in the fact that the persons who are to make it, while they are made to bear the cost of a public work, are at the same time to suffer no pecuniary loss thereby; their property being increased in value by the expenditure to an amount at least equal to the sum they are required to pay.' Again, the author says: 'There can be no justification for any proceeding which charges the land with an assessment greater than the benefits. ”

“ The Interstate Commerce Commission, in their fourth annual report, assert that "there can be no standard of expense which the courts can act upon and apply, but that the whole field is one of judgment in the exercise of a reasonable discretion by the managing powers, or by the public authorities in reviewing their action." ”

“ To determine whether the activities of a taxpayer are 'carrying on a business' requires an examination of the facts in each case. As the Circuit Court of Appeals observed, all expenses of every business transaction are not deductible. Only those are deductible which relate to carrying on a business. ”

“ Appropriation to defray the expense of carrying this act into effect.Sec. 4. And be it further enacted, That the sum of two thousand dollars be, and the same hereby is appropriated for defraying the expense authorized by this act, payable out of any money in the treasury, not otherwise appropriated. ”

“ The courts, not believing that Congress meant all litigation expenses to be capitalized, have created the rule that such expenses are capital in nature only where the taxpayer's 'primary purpose' in incurring them is to defend or perfect title. ”

“ Attorneys, solicitors, and proctors may charge their clients reasonably for their services, in addition to the taxable costs, but nothing can be taxed as cost against the opposite party, as an incident to the judgment, for their services, except the costs and fees therein described and enumerated.' No distinction is made by the court or by the statutes between the fees prescribed in admiralty cases as an incident to the judgment and those so incident in other cases. ”

“ With the estimate of the physical value of a property before it—which represents money actually invested, together with such accruals to costs as it may be determined that the owner is reasonably entitled to have considered—any Court, tribunal, or commission is in a better position to mete out impartial justice, whether it be the regulation of a rate, the assessment of a tax, or the imposition of a fine. ”

“ All the parties to these proceedings shall bear their own costs. The costs and expense of the Special Master shall be equally divided between the plaintiffs as a group and the defendants as a group in Nos. ”

“ The statute, in imposing the per centum of tax on the income of the individual, makes a charge on him of a sum which is certain for the purposes of an action of debt, because it can be made certain through the action of a judicial tribunal, by following the rules laid down in the statute. ”

“ We hold therefore that the Board of Tax Appeals was not required to regard the administrative finding of guilt under 39 U.S.C. §§ 259 and 732, 39 U.S.C.A. §§ 259, 732, as a rigid criterion of the deductibility of respondent's litigation expenses.
Whether an expenditure is directly related to a business and whether it is ordinary and necessary are doubtless pure questions of fact in most instances. ”

“ The proceeding to ascertain the benefits or losses which will accrue to the owner of property when taken for public use, and thus the compensation to be made to him, is in the nature of an inquest on the part of the State, and is necessarily under her control. It is her duty to see that the estimates made are just, not merely to the individual whose property is taken, but to the public which is to pay for it. ”

“ And Treasury Regulations 77, Art. 221 (h) promulgated under the 1932 Act [2] defined 'net income * * * from the property' as used in § 114 (b) (3) so as to require 'development costs' of the kind here involved to be deducted from 'gross income from the property'. [3] The Board of Tax Appeals held that petitioner need not deduct these development expenditures in applying the 50 per cent limitation on depletion allowance (36 B.T.A. 1327) and the Circuit Court of Appeals reversed (5 Cir., 102 F.2d 596) . ”