Lewis v. Commissioner

MttlROney, </., dissenting: I agree with the dissenting opinion of Judge Rice and I also disagree with the disallowance of expenses incurred by petitioner in successfully defending himself against attempts by his wife to have him declared an incompetent. The majority opinion states the rule of Estate of Frederick Cecil Bartholomew, 4 T. C. 849 , is that a taxpayer’s expenses incurred “in resisting the attempt of members of his family to gain control of property held by him for the production of taxable income,” are deductible under section 23 (a) (2). It seems to me the application of this rule in the instant case would render the expenses incurred by the taxpayer in defending the incompetency action, deductible. In the wife’s suit she prayed that she or a banking institution, or both, take over property which was admittedly held by him for the production of income.

I think Eugene E. Hinkle, 47 B. T. A. 670, cited in the majority opinion can be distinguished. There the property was not “held” by the taxpayer “for the production of income.” It was actually held by a conservator and the suit was by the taxpayer to gain his freedom and the restoration of property order was, as the opinion points out, merely an incidental order that “naturally would follow from the court’s determination that he was competent to handle his own affairs.” It is also true the Hinkle case was decided under the rule of Higgins v. Commissioner, 312 U. S. 212 , before section 23 (a) (2) was adopted.