Petition for Writ of Certiorari — Carey v. Commissioner

Supreme Couri, . S.

FIllLkED

AUG 26 1972

RODAK, JR.,CL

OCTOBER TERM, 1972

No WP=BLO

JAMES B. CAREY and MARGARET CAREY,

Petitioners,

V.

COMMISSIONER OF INTERNAL REVENUE

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ELLIS W. MANNING, JR.

1625 K Street, N.W.

Washington, D.C. 20006

Counsel for Petitioners

Of Counsel:

Lyman G. Friedman,

Jonathan S. Cohen

Wenchel, Schulman & Manning

1625 K Street, N.W.

Washington, D.C. 20006

SPATE AO EGE SIE IO LTS EPI

INDEX

Page(s)

Re ee ]

CE Ee AGRE a a ee i

ee Wiha eu al wb Wa Shim w vd Ok oS KK lo 0's 2

Statutes and Regulations Involved ...................... 2

ie edt a Os aris or UIE A a a dw KO ee we ee ww wee em 2

Reasons for Granting the Writ ......................... 4

ANSE at le an a eee 10

I a NR ee era re 12

REESE Fee pe ee ee eee 32

EE See e ah nee kas ES Read eo dwind sooo e Keown 33

Brrewdiy D PG

CITATIONS

Cases:

Central Foundry Co. v. Commissioner,

ee oe bees beware 6

Cremona v. Commissioner,

a 5

Furner v. Commissioner,

Ee ee 5

Graham v. Commissioner,

OUD. 8 cn cenuccccccessccces 6

Haft v. Commissioner,

RSIS BESET AIA ROCA Pay a Ae 5

Kenfield v. Commissioner,

IN a 5

(ii)

Locke Mfg. Companies v. United States,

237 F. Supp. 80 (D. Conn.,.1964) ....... rr rom 6

Maness v. United States,

367 F.2d 357 (C.A. 5, 1966),

Ce OEE 6 ob ccc ewan wee dne baw ean 9

Maness v. Commissioner,

Ee EEE Kn ba RKR Rds ee GOn cEeewe dene kas Qu

Mays v. Bowers,

201 F.2d 401 (C.A. 4, 1953),

cart, Gam., FAS US. SED (UGGS) . ww ccc ccc ces 9

McDonald v. Commissioner,

Re OED vo bbs db weeks ee eedeuees deus 7, 8,9

Motto v. Commissioner,

oe le a a ag ie Rina na 5

Primuth v. Commissioner,

a so alae kl ge Oy GS ae 5

Sanderson v. Commissioner,

SE Oo gn 6 ek se Ch ead oe eM EKO eS 7

Schmidlapp v. Commissioner,

ee ee es Be WUD wk on oh eee wee wensensenves 7

Surasky v. Commissioner,

ee a re 6

Commissioner v. Tellier,

res ere ey rere 9

Trent v. Commissioner,

Be a re Be BN oo vk ko sce ecucwaeaeunce 7

Vernon v. Commissioner,

18 T.C.M. 851 (1959),

affirmed, per curiam, 286 F.2d 173

ee We Es 5 5 Oa oo no oe Oe ee ee ene 9

(iii)

Statutes:

Internal Revenue Code of 1954 (26 U.S.C. 1964 ed.):

SE 6.54 5s sae abs oe ek oe Poe 33

Re I re eee he ner ee ear aes 33

Labor-Management Reporting and Disclosure Act of 1959

(Landrum-Griffin Act):

EN hs Sak KOs aie Ob ewe El eee wkd ale 6

Re NR SEARO SR terete NN Sag At AS 7,3,4

SEE + We 5 05% ice Blan aw alae ee eee eae 6, 35

Miscellaneous:

Treasury Regulations on Income Tax (26 C.F.R.):

SOI og eS Ck es ck aon burke ieee wen 33

ry ne eae 34

acess ODOS. oO -+ nas

IN THE

Supreme Court of the United States

OCTOBER TERM, 1972

No.

JAMES B. CAREY and MARGARET CAREY,

Petitioners,

WV.

COMMISSIONER OF INTERNAL REVENUE

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Petitioners, by their counsel, hereby petition for a writ

of certiorari to review the judgment of the United States

Court of Appeals for the Fourth Circuit in this case.

OPINION BELOW

The opinion of the Tax Court (App. A, infra, p. 12) (R.

90-117)! is reported at 56 T.C. 477. The per curiam opinion

of the Court of Appeals (App. B, infra, p. 32) is not yet

officially reported.

JURISDICTION

The judgment of the Court of Appeals was entered on

May 16, 1972 (App. B, infra, p. 32). A timely petition for

——q—qs

I «R» refers to the reproduced record in the Court of Appeals

entitled “Appendix to the Brief for Appellants.”

l

2 aii

Pee. ®, wera, e.2b-

rehearing was Nled on May 30, 1972, and was denied on

June 12. 1972.})The jurisdiction of this Court is invoked

under 28 U.S.C. §1254(1).

QUESTION PRESENTED

Whether the petitioner, a career labor leader, who had

held the position of President of the International Union of

Electrical, Radio and Machine Workers for an uninterrupted

period of 15 years, is entitled to deduct, for federal income

tax purposes, amounts expended by him—which were un-

challenged as to their reasonableness of amount—in an un-

successful effort to retain his position for another term.

STATUTES AND REGULATIONS INVOLVED

The pertinent provisions of Section 162 and 212 of

the Internal Revenue Code of 1954, of Section 481 of the

Landrum-Griffin Act, and Treasury Regulations on Income

Tax, Sections 1.162-20(c)(1) and 1.212-1(f), are set forth

in Appendix C, infra, pp. 33-36.

STATEMENT OF THE CASE

For more than 30 years, petitioner has been deeply

involved in and committed to the cause of organized labor

in the United States.2 (App. A infra, p. 13; R. 13, 29.)

From 1949 to 1964, petitioner served continously as Presi-

dent of the International Union of Electrical, Radio and

Machine Workers (the “IUE”), a major labor organization

with a rank-and-file membership drawn from workers in the

electrical machinery, electrical appliance, tool and die,

2 “Petitioner” refers to James B. Carey. His wife, Margaret

Carey, is a party hereto because she and her husband filed a joint

return for the tax year in question.

PONS OP ee REM TS) AE AY Ts TRF oe

EI ae oF bee ee i " wre sa als

machine tool and allied industries, and in related fields.

'(R. 14, 33, 92.) In 1964, the membership of the IUE was

nearly 300,000 persons.

In each of the presidential elections held at IUE con-

ventions prior to 1964, petitioner was unopposed for the

position, and was elected to office by acclamation of the

convention. (R. 14.) At the September 1964 convention,

however, petitioner was seriously and vigorously challenged

for the position he had held since the inception of the IUE.

(R. 14.) Under the IUE constitution, the selection of the

President was done by mail ballot, after nominations were

made at the convention. In order to reach the huge IUE

rank-and-file membership, the distribution of informational

materials, setting forth a candidate’s views with respect to

issues affecting the union, could be appropriately handled

only by printing and distributing leaflets to the member-

ship. (R. 68.)

Under Section 481(g) of the Labor-Management Re-

porting and Disclosure Act of 1959 (the “Landrum-Griffin

Act”), 29 U.S.C. Sec. 481(g), however, neither union nor

employer funds may be contributed to or applied to

promote in any way the candidacy of any person in any

election subject to the terms of the Act. (R. 16.) Peti-

tioner, therefore, was forced to use his own personal funds

to defray costs of printing and distributing leaflets among

IUE members. (R. 27.) These funds amounted to slightly

more than $14,000, which petitioner had to borrow from a

bank.

Petitioner lost the IVE election. He was forced to use

substantially all of his severance pay, received when his

service with the IUE terminated, to repay the loan. (R. 19,

27.) The expenditures made in connection with the IUE

election by petitioner have not been challenged as un-

reasonable or excessive in amount.

Po

ens ae Yowe

i

The Commissioner determined that the money ex-

pended in 1965 in connection with the petitioner's effort

to retain the [UE presidency was not deductible for federal

income tax purposes. Petitioner filed a timely petition for

redetermination of the deficiency (R. 3-7), and litigated his

case in the Tax Court, which, by virtue of a concurring

opinion, held in favor of the Commissioner, in a divided

opinion reviewed by the whole Court, with two dissents.

The Fourth Circuit affirmed the Tax Court’s decision, per

curiam. (App. B, infra, p. 32).

REASONS FOR GRANTING THE WRIT

The decision below denies to labor leaders and union

administrators equality of tax treatment with corporate

executives and other taxpayers. It is demonstrable that such

result is wholly inconsistent with applicable precedents.

Such a glaring inequity is plainly wrong, and presents

a significant Federal question to be resolved by this Court.

1. The decision below, in denying petitioner a deduc-

tion for his costs of seeking re-election to the Presidency of

the IUE, is in direct conflict with the tax treatment given

to comparable employment-elated expenses incurred by

salesmen, engineers, corporate executives, teachers and

many other individuals pursuing a particular vocation or

profession.

One unavoidable consequence of the decision below is

to establish, without any legislative direction or approval, 2

judge-made, inequitable tax advantage in favor of corporate

managers, inasmuch as costs incurred in order to secure

their reelection as corporate directors and officers are al-

lowed as income tax deductions, while entirely similar costs

incurred by union administrators have now been disallowed.

— ea NTC IT

PS ee 8 LT :

Indeed, union officials and administrators are in a

uniquely unfavorable position, for the courts have consist-

ently held that an individual may be in the “trade or

business” of being engaged in a particular kind of work and

that the ordinary and necessary expenses of protecting his

employment relationship, or of finding a new job, are tax

deductible under Section 162(a) of the Internal Revenue

Code. See, e.g... Primuth v. Commissioner. 54 T.C. 374

(1970); Haft v. Commissioner, 40 T. C. 2 (1963); Trent vy.

Commissioner, 291 F.2d 669 (C.A. 2, 1961); Schmidlapp v.

Commissioner, 96 F.2d 680 (C.A. 2, 1938): cf Furner vy.

Commissioner, 393 F.2d 292 (C.A. 7, 1968).

This rule of deductibility has been broadened and

developed in a substantial number of recent cases, and it

can now be said that, on the basis of the decision below,

only labor union officials are denied its benefit. See, Ken-

field v. Commissioner, 54 T.C. 1197 (1970); Motto vy.

Commissioner, 54 T.C. 558 (1970). It applies even in the

situation where the individual, seeking new employment

within his profession, fails to obtain a job. Cremona y.

Commissioner, 58 T.C. No. 20 (1972).3

However, the court below failed to follow these set-

tled lines of precedent.

Moreover, the decision below results in an unfair and

anomalous distinction between officals employed by busi-

ness eecorporations and officials employed by labor unions,

although in both cases the individuals in question are en-

gaged in the task of administering large and complex organ-

izations.. In the former case, the tax law allows a corpora-

tion a deduction for expenses, incurred on behalf of its

management, in seeking to secure their positions in a proxy

contest. Locke Mfg Companies v. United States, 237 F.

Supp. 80 (D. Conn., 1964); Central Foundry Co. v. Com-

missioner, 49 T.C. 234 (1967). And where an individual

office-seeker or office-holder must pay proxy fight contests

out of his own pocket, he is allowed the deduction person-

ally. See, eg., Graham v. Commissioner, 326 F.2d 878

(C.A. 4, 1964); ct. Surasky v. Commissioner, 325 F.2d 191

(C.A. 5, 1963). The basis of this deduction is the acknowl-

edged profit-making, income-producing motive which occa-

sions the outlay of expense.

However, a career labor union official, who is also

required by the nature of his job, and by federal law, to

stand regularly for re-election,’ is now denied a deduction

for reasonable expense incurred in seeking to retain his job.

2. The decision below is one of importance from the

standpoint of the interaction of federal tax and labor

law.

Labor unions are prohibited by the terms of Section

481(g) of the Labor-Management Reporting and Disclosure

Act of 1959 (Landrum-Griffin Act),5 from incurring ex-

4 Section 481 (a) of the Labor-Management Reporting and

Disclosure Act of 1959 (Landrum-Griffin Act) provides:

pense on behalf of a union official who is seeking re<lec-

tion. However, the Act expressly authorizes individual can-

didates for union office to incur such expenses. The

encouragement of such expenditures is directly in accord

with the clear congressional purpose of promoting union

democracy, which underlies the entire Landrum-Griffin Act.

The court below has overlooked this legislative purpose in

denying a tax deduction to petitioner for the expenditures

here in issue.

Even worse, by its per curiam decision, the court

below has supported the use of the Landrum-Griffin Act by

the Tax Court to create here a singular exception to the

firmly established tax law rule that a taxpayer is entitled to

deduct job-related expenses which the terms of his employ-

ment require him, rather than his employer, to pay.

Schmidlapp v. Commissioner, 96 F.2d 680 (C.A. 2, 1938):

Trent v. Commissioner, 219 F.2d 669 (C.A. 2, 1961):

Sanderson v. Commissioner, 16 T.C.M. 105 (1957).

3. The decision below cannot be justified upon the

basis of this Court’s decision in McDonald v. Commissioner,

323 US. 57 (1944), which denied a deduction for

campaign expenditures by a candidate ‘or public office, on

the ground that he was not in the business of holding such

office, but was “trying to be a judge for the next five

years.” 323 U.S. 57, at 60. The McDonald decision also

expresses (by way of dictum) the view that allowance of a

deduction for campaign expense where a public office is

McDonald can only be applied to deny a deduction in

the instant case if the courts are willing to hold that a

professional administrator who has spent a lifetime in con-

© Section 481(c) of the Landrum-Griffin Act, which explicitly

permits a candidate for union office to distribute af his own expense

literature in aid of his candidacy. “i

>... =

a

tinuous union employment is to be regarded as seeking

such employment for the first time upon each occasion on

which he stood for re-election throughout his career, or if

the courts are willing to hold that a labor union officer is a

public official.

Upon a careful reading, it is clear that the decision

below has not attempted to base application of the McDon-

ald case upon a finding that the petitioner was trying to

become a union official for another term. (App. A, infra p.

27). Nor can it realistically be asserted that petitioner, as

a career union official holding the same position continu-

ously since 1949, was seeking a new form of employment.

However, the Tax Court has held the public policy

argument of McDonald to be controlling here. For it has

held that the legislative interest evinced in union adminis-

tration by the Landrum-Griffin Act requires the conclusion

that there is a “national policy” that union offices are

sufficiently “akin to a public office” to justify the applica-

tion of the McDonald rule. (App. A, infra, pp. 21, 22).

Nowhere in the Landrum-Griffin Act, nor in its legisla-

tive history, is there any assertion or suggestion of such a

“national policy” or legislative purpose. The Tax Court

acknowledged that there is no express statement of such a

purpose, and it was forced to base its finding of such a

policy upon the general “sentiments” of public interest in

union activities reflected in the Senate and House Commit-

tee Reports accompanying the Landrum-Griffin Act. (App.

A, infra pp. 20, 21). Those “sentiments,” however, are

directed to the express legislative purposes of the Lan-

drum-Griffin Act, and do not reach the level of a sharply-

defined policy with respect to income tax deductibility. If

union officials are properly to be treated as holders of

public offices for federal tax purposes, it should follow that

OT Ee ot.

the courts are willing to regard them as public officeholders

for all purposes. Petitioner submits that a Congressional

mandate for such a position does not exist.

It therefore follows, under this Court’s deicsion in

Commissioner v. Tellier, 383 U.S. 687 (1966), that peti-

tioner’s expenses are properly deductible, in the absence of

any “sharply defined public policy” which would be frus-

trated by the allowance of the deduction.

The Commissioner of Internal Revenue himself appar-

ently feels that there is little continuing vitality in the

public policy dictum of McDonald. In Revenue Ruling

71-470, 1971-43 I.R.B. 9, the Commissioner ruled that

expenses incurred by an elected public official in an active

campaign to defend himself against a recall proceeding are

deductible business expenses, and in so doing construed this

Court’s decision in McDonald as resting upon the sole

ground that the taxpayer there was seeking election as a

judge and was not carrying on the business of “judging.”

For the reasons set forth above, the decision below is

in conflict with the established case law governing the

deduction of expenses incurred by an individual as part of

the requirements of his employment. It conflicts with the

7 On this basis, there is no support for the decision below on the

“public office” campaign cases, such as Mays v. Bowers, 201 F.2d 401

(C.A. 4, 1953), cert. den., 345 U.S. 969 (1963); Maness v. United

States, 367 F.2d 357 (C.A. 5, 1966), cert. den, 386 US. 932

(1966), and Maness v. Commissioner, 54 T.C. 1602 (1970). Nor is

the decision supported by the holding in Vernon v. Commissioner, 18

T.C.M. 851 (1959), affirmed, per curiam, 286 F.2d 173 (C.A. 9,

1961), wherein a local union official was denied a deduction for

expenditures incurred to “curry favor” with fellow members, for it

was explicitly found as a fact in Vernon that the taxpayer's position

as a business representative of the union did not constitute a trade or

business, in contrast to the indisputable fact that in the present case

the petitioner was in the business of being an elected, career union

leader, and in no other.

10

established case law permitting the deduction of expenses

of seeking a new job within a taxpayer’s established voca-

tion. It establishes an unjustifiable distinction between

corporate managers and union administrators. Finally, it

raises fundamental questions as to the status of labor union

officials under federal law. The matier is therefore appro-

priate for review by this Court.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

2a AW

Ellis W.

Counsel for

1625 K Street, N.W.

Washington, D.C. 20006

August 24, 1972

Of Counsel:

Lyman G. Friedman,

Jonathan S. Cohen

Wenchel, Schulman & Manning

1625 K Street, N.W.

Washington, D.C. 20006

a 1]

CERTIFICATE OF SERVICE

This is to certify that service of the foregoing petition

for a writ of certiorari has been made thisQ¢thday of

August, 1972 upon counsel for the government by deposit-

ing three copies in a United States mail box, with first class

postage prepaid, addressed to the Solicitor General, Depart-

ment of Justice, Washington, D. C. 20530, and by deposit-

_ ing three copies in a United States mail box, with first class

postage prepaid, addressed to the Commissioner of Internal

Revenue, Washington, D. C. 20224.

Ellis W. Mafining, Jr.

Counsel for ioners

12

APPENDIX A

UNITED STATES TAX COURT

JAMES B. and MARGARET CAREY, Petitioners v. COM-

MISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5556-68. Filed June 14, 1971.

OPINION

TANNENWALD, Judge: The respondent determined a

deficiency of $3,819.76 in petitioners’ Federal income tax

for the calendar year 1965. The principal issue for our

consideration is whether James B. Carey (hereinafter some-

times referred to as “petitioner’’) is entitled to deduct

expenditures which he made in connection with an unsuc-

cessful attempt to be reelected president of the Interna-

tional Union of Electrical, Radio, and Machine Workers,

AFL-CIO-CLC (hereinafter referred to as the IUE).!

All of the facts have been stipulated, and the stipula-

tion and exhibits attached thereto are incorporated herein

by reference.

James B. and Margaret Carey, who are husband and

wife, filed a joint Federal income tax return for the calen-

dar year 1965 with the district director of internal revenue,

Baltimore, Maryland. At the time of the filing of their

petition herein, they resided in Silver Spring, Maryland.

1 The expenditures which were disallowed in the deficiency

notice are detailed at p. 5, infra. Since petitioners have conceded that

amounts paid in 1964 cannot be deducted in 1965 and respondent

has conceded the deductibility of certain interest payments, we ad-

dress ourselves only to the remaining expenditures.

Se

Paes

13

Petitioner has been active in the labor union move-

ment since the early 1930’s. During that period, he served

as secretary, and then as secretary-treasurer, of the Congress

of Industrial Organizations (CIO) from its formation in

1938 to its merger with the American Federation of Labor

(AFL) in 1955. Following that merger, he served as secre-

tary-treasurer of the AFL-CIO Industrial Union Depart-

ment, as vice president of the AFL-CIO, and as a member

of the Executive Committee and Executive Council of the

AFL-CIO. He is presently Director of Labor Participation

for the United Nations Association of the United States.

From 1949 to 1965, petitioner was elected by ac-

clamation to eight consecutive two-year terms as president

of the IUE, a major labor union. Petitioner, as chief execu-

tive officer of the IUE, was charged with responsibility for

directing union affairs, which included presiding over con-

ventions of the union and meetings of the union’s Execu-

tive Board. Along with the district president of each district

of the union, he was responsible for the maintenance and

improvement of conditions of employment for those per-

sons within the jurisdiction of the IUE.

The union’s constitution set the president’s maximum

salary at $25,500 per year. In his 1965 return, petitioner

reported receiving a salary of $25,499.76.

Pursuant to the IUE constitution, the candidates for

IUE president are nominated at the national convention.

Election is by means of a referendum conducted by mail.

At the 1964 convention, held in September of that year,

Paul Jennings and petitioner were nominated for the presi-

dency of the IUE. When the results of the referendum were

finally tabulated, Jennings was declared the winner.

~

In December 1964, during the course of the counting

of the ballots, Jennings filed suit in the United States

District Court for the District of Columbia seeking to

14

enjoin further vote tabulation until adequate safeguards

were provided to insure accuracy. The defendants in this

suit were the petitioner, the union trustees charged with

supervision of the election, the IUE’s secretary-treasurer,

and the IUE itself. The complaint alleged, inter alia, that

petitioner, as the incumbent president of the IUE, would

not act impartially to insure an accurate tabulation of the

votes. In defending against this action, which was dismissed,

petitioner incurred expenses of $260 which were paid in

1965S.

On their income tax return for the year 1965, peti-

tioners deducted the following amounts as “Employee busi-

ness” which were incurred by petitioners as president of

the IUE and which were disallowed by respondent in the

deficiency notice:

Date Paid Description Amount

9/29/64 Petitioner's contribution to his campaign : $ :

fund $ 680.16"

9/30/64 Petitioner Margaret Carey's contribution to

petitioner's campaign fund 700.00"

1/28/65 _— Petitioner's personal assumption and payment

of accrued but unpaid campaign fund expenses 14,108.19

1965 _ Petitioner's payment of interest on $14,108.19

loan used to repay unpaid campaign expenses 296.84""

1965 _ Petitioner's payment of legal fee in defending

action brought by Pau! Jennings 260.00

1965 Petitioner's payment of accounting fee for

election expense audit. 25.03

$16,070.22

* Petitioners concede that these amounts are not proper deduc-

tions in the year 1965 only because they were in fact paid in 1964

and petitioners used the cash receipts and disbursements method of

accounting for the year in question.

** Respondent concedes that, regardless of the outcome of the

instant case, this amount is deductible under section 163, I.R.C.

1954.

—_ :

We are again confronted—this time in the context of

campaign expenditures made in the course of an unsuccess-

ful attempt by petitioner to be reelected president of an

international labor union—with the extent of the allowable

deductions under sections 162 and 212.? In essence, the

determination of this issue rests upon the extent to which

our recent decision in David J. Primuth, 54 T.C. 374

(1970), or that of the Supreme Court in McDonald y.

Commissioner, 323 U.S. 57 (1944), is applicable.

In McDonald, the Supreme Court held that the ex-

penditures made by a state court judge, who had been

given an interim appointment, in seeking election for a full

term were not deductible under the predecessor of section

162 (section 23(a)(1) of the Internal Revenue Code of

1939)? on the ground that they were not incurred in the

business of judging but ‘“‘in trying to be a judge.” See 323

U.S. at 60.

2 all references unless otherwise specified, are to the Internal

Revenue Code of 1954, as amended.

SEC. 162.. TRADE OR BUSINESS EXPENSES.

(a) In General.—There shall be allowed as a deduction all

the ordinary and necessary expenses paid or incurred during the

taxable year in carrying on any trade or business * * *.

SEC. 212. EXPENSES FOR PRODUCTION OF INCOME.

In the case of an individual, there shall be allowed as a

deduction all the ordinary and necessary expenses paid or

incurred during the taxable year—

(1) for the production or collection of income;

3 The decision in McDonald was based on the provisions of the

Internal Revenue Code of 1939. However, insofar as this case is

concerned, the 1939 Code provisions are identical to provisions of

the Internal Revenue Code of 1954. Compare section 23(a) (1) and

section 23(a)(1) and section 23(a) (2), I.R.C. 1939, with section

162(a) and section 21 2(1), LR.C. 1954.

— — PAE IIT TE,

oes ae ,

16

In reaching this decision, however, the Court strongly

indicated its deep concern for the powerful considerations

of public policy involved in allowing a deduction for ex-

penses incurred in running for public office. Moreover, the

Court emphasized the history of “disallowance of campaign

expenses as consistently reflected by legislative history,

court decision, Treasury practice and Treasury regulations.”

See 323 U.S. at p. 62.4 As a consequence, and in light of

the additional fact that the actual majority in McDonald

was Obtained by a simple concurrence in result by Mr.

Justice Rutledge, it is questionable whether the legal theory

espoused in the opinion of the Court has as wide an

application as respondent would have us believe. Indeed,

the Court itself indicated that the broad brush stroke of its

opinion might be more apparent than real, when it stated

that it would leave to this Court the “detailed analysis of

the special circumstances of various ‘businesses’ and ex-

penses incident to their ‘carrying on’”’ and the consequent

determination of the “allowed or disallowed deductions.”

See 323 U.S. at 65. It seems to us that the Court clearly

4 Since McDonald, the deductibility of campaign expenditures

has been uniformly denied. Maness v. United States, 367 F. 2d 357

(C.A. 5, 1966); Shoyer v. United States, 290 F. 2d 817 (C.A. 3,

1961); Mays v. Bowers, 201 F. 2d 401 (C.A. 4, 1953). See also Long

v. Commissioner, 277 F. 2d 239 (CA 8, 1960); Davenport y.

Campbell, 238 F. Supp. 568 (N.D. Tex. 1964), William H. Maness, 54

T.C. 1602 (1970); Ronald W. Shotund, 5Q T.C. 503 (1968). Compare

Vernon v. Commissioner, 286 Fld 173 (C A. 9, 1961), affirming

per curiam a Memorandum Opinion of this Court, Robert Edward

Kleinschmidt, 12 T.C. 921 (1949) Saeilarly, Congress has continued

to evidence a national policy of denying tax benefits to expenditures

made in connection with political campaigns, including unsuccessful

efforts in recent years, too numerous to detail, to obtain the enact-

ment of legislation permitting the limited deduction of contributions

to political parties. See sections 27! and 276. See also 4A Mertens,

Law of Federal Income Taxation (Riordan Rev.), secs. 25.38 and

25.135.

LE OV SD EM PENG ae ee

_—

17

left room for different results in different factual situations.

Compare Caruso v. United States, 236 F. Supp. 88 (D.N.J.

1964).

It was in the spirit of this qualification to the thrust

of McDonald that our decision in Primuth was rendered. In

that case, we allowed the deduction, under section 162, of

employment agency fees paid by the taxpayer in the course

of obtaining a new position of a type similar to the one he

occupied. In so doing, we emphasized that such an expense

“must be deemed ordinary and necessary from every realis-

tic point of view in today’s marketplace” and that “the

business expenses which an employee can incur in his own

business are rare indeed.” See 54 T.C. at 379. Moreover, we

noted that the expenditures involved were in an area in

which respondent’s rulings had constructed cloudy distinc-

tions. See 54 T.C. at 380 and concurring opinions at 383

and 384.

The critical question is whether, in light of the fore-

going, the campaign expenditures herein are more analogous

to the expenses in McDonald or to the expenses in

Primuth. Unlike employment agency fees, we do not think

that common understanding in the ordinary affairs of life

would consider that campaign expenditures should be en-

compassed as “ordinary and necessary expenses * * * in

carrying on any trade or business” (Sec. 162) within the

“usual, ordinary and everyday meaning of the term.” See

Old Colony R. Co. y. Commissioner, 284 U.S. 552, 561

(1932). Under these circumstances, even taking into ac-

count whatever flexibility McDonald may allow by charging

us with “detailed analysis” of various situations (see p. 8,

supra), we think that the frame of reference herein is so

closely analogous that the thrust of McDonald is highly

persuasive in favor of the conclusion that petitioner’s ex-

penditures fall within McDonald and should therefore not

be deductible.

18

We are not impressed with petitioners’ argument that

the absence herein of the public policy considerations

which underlay McDonald should be determinative. Aside

from the fact that we would be inclined to apply Mc-

Donald without regard to those considerations, we think

that a comparable public policy element is involved in this

case.

The impact of labor unions in our modern industrial

society is obvious. Deep legislative concern over the internal

operations of labor unions, especially union election, is

evidenced by the Labor-Management Reporting and Dis-

closure Act of 1959, 73 Stat. 519, 29 U.S.C., sec. 401 ef

seq. (hereinafter the Labor-Management Act of 1959). That

Act enacted into law provisions covering some thirty-five

subjects in the areas of public disclosure of union internal

and financial affairs, falsification and destruction of union

records; financial transactions, holdings, and expenditures

by union officials and employees; involvement in union

activities of persons with criminal records; standards for the

establishment of union trusteeships and public disclosure

and court proceedings in connection therewith; and union

elections. Eleven of these provisions deal directly with

union elections (73 Stat. 519, 533-534, 29 U.S.C., secs.

481-483) in the following manner:

(23) Requires election of constitutional offi-

cers and members of executive boards of interna-

tional unions at least every 5 years by secret

ballot or by delegates elected by secret ballot;

(24) Requires election of constitutional offi-

cers 4nd members of executive boards of local

unions at least every 3 years by secret ballot;

(25) Protects freedom of opportunity to

nominate candidates in union elections;

we - yer a OS

_

19

(26) Protects members’ right to vote in

union elections without being subject to improper

interference or reprisals;

(27) Insures that every candidate for union

office shall be afforded the opportunity to dis-

tribute at his own expense literature in support

of his candidacy to all the members of the union:

(28) Requires that all candidates shall have

the opportunity to have observers present at the

balloting and at the counting of the ballots in a

union election;

(29) Prohibits use of union funds to

promote individual candidacy in union elections;

(30) Procedures whereby a union officer

guilty of serious misconduct in office may be

removed by a secret ballot vote after court pro-

ceedings if the union’s constitution does not pro-

vide adequate machinery for such removal:

(31) Provides for investigations by the

Secretary of members’ complaints of improper

procedures in union elections and court actions

by the Secretary to set aside improperly con-

ducted elections;

(32) Empowers Federal courts to direct new

elections to be conducted under supervision of

the Secretary where it finds union election was

improperly conducted;

(33) Preserves members’ rights to enforce

union's constitution under State laws with respect

to trusteeships and safeguarding fair procedures

before an election. [S. Rept. No. 187, to accom-

pany S. 1555, 86th Cong., Ist Sess. (1959), 2

20

U.S. Code Cong. and Adm. News (1960 ed.), p.

2320.]

The House Report states that labor unions are “a

balancing force in our free economy.” H. Rept. No. 741, to

accompany H.R. 8342, 86th Cong., Ist Sess. (1959) [2

U.S. Code Cong. and Adm. News (1960 ed.), p. 2476]. It

further states that the 1959 legislation was needed because:

personal and autocratic. In some cases men who

have acquired positions of power and responsi-

bility within unions have abused their power and

forsaken their responsibilities to the membership

and to the public. The power and control of the

affairs of a trade union by leaders who abuse

their power and forsake their responsibilities in-

evitably leads to the elimination of efficient,

3

f

i

|

|

legal guaranty of free and periodic elections. The

responsiveness of union officers to the will of the

members depends upon the frequency of elec-

tions, and an honest count of the ballots. Guaran-

ties of fairness will preserve the confidence of the

public and the members in the integrity of

ee i ee mere

wen

21

union elections. [Emphasis added.] [2 U.S. Code

!

i

,

it

oe

i

ai

pay

uli

584

teeee

if

HE

of union policy. This is not to say

i aus © ee damauiety enone

is necessary to have each union mem-

make decisions on detail as in a New Enaland

1}

No. 187, to accompany S. 1555, 86th Cong., Ist

Sess. (1959), 2 U.S. Code Cong. and Adm. News,

supra at 2323.]

we believe that the presidency of a large international labor

union is akin to a public office so that the considerations

emphasized in McDonald and its progeny, while not deter-

minative, may properly be taken into account herein We

> We are not suggesting that such a point of view should be

adopted in respect of every union office. In Ernest H. Vernon, TC.

Memo. 1959-189, affirmed per curiam, 286 F. 2d 173 (CA. 9,

1961), we indicated that the office of business representative of a

local union did not constitute a public office.

22

are satisfied that those considerations—reflecting as they do

the view that the election process is a sensitive element in

the fabric of our democratic way of life—constitute a na-

tional policy which falls within the narrow delineation of

the standard of nondeductibility set forth in Commissioner

y. Tellier, 383 U.S..687 (1966).

We hold that the campaign expenditures of petitioner

are not deductible under section 162. Moreover, since the

same policy considerations are involved, and more particu-

larly since section 212 merely enlarges the categories of

incomes with reference to which expenses are deductible

and not the range of allowable types of deductible ex-

penses, those expenditures are not deductible under that

section. McDonald v. Commissioner, supra, 323 U.S. at

62-63. If a deduction is to be sanctioned, we think that the

course of history and the paramount importance of the

proper functioning of the election process, insofar as it

involves not only public officers but offices of labor unions

encompassed by the Labor-Management Act of 1959, de-

mands that Congress should unequivocally so provide. Cf.

Mays v. Bowers, 201 F. 2d 401 (C.A. 4, 1953), at 403. See

also footnote 4, supra.

We have no need at this point to address ourselves to

the question of how far such public policy considerations

should extend to other types of elections. We note, how-

ever, that a deduction has been allowed, at least within the

context of section 212, for expenses incurred by individuals

in connection with general corporate proxy solicitation ex-

penses. See Graham v. Commissioner, 326 F. 2d 878 (C.A.

4, 1964); Surasky v. United States, 325 F. 2d 191 (C.A. 5,

1963); Rev. Rul. 236, 1964-2 C.B. 64. We also note that

Congressional regulation of such solicitation does not seem

to have extended as far as has Congressional regulation of

union elections. Compare 29 U.S.C., sec. 481(g), with

Stock Exchange Regulation, Hearings before House

PSO LP LEE OL Om , ,

23

Committee on Interstate and Foreign Commerce on H.R.

7852 and H.R. 8720, 73rd Cong., 2d Sess. (1934), p. 141,

and SEC Enforcement Problems, Hearings before a subcom-

mittee of Senate Committee on Banking Currency, 85th

Cong., Ist Sess. (1957), p. 115. Cf. 15 U.S.C., sec. 79 Ife)

and Rule U-65 issued thereunder.

Under the circumstances of this case, there also is no

need to delve into the question whether there should be a

distinction between an “in” candidate and an “out” candi-

date and the elements of advantage that such a distinction

would confer on a incumbent. Similarly, since the point

was not argued by either party, we do not consider

whether the fact that a fixed term of office was involved

might convert an expenditure such as is involved herein, if

it were otherwise deductible, into an amortizable capital

item in the case of a successful candidacy or an abandon-

ment loss in the case of an unsuccessful candidacy. Cf.

Maness v. United States, supra; Mays v. Bowers, supra.

Petitioner, however, is entitled to deduct the costs

incurred in defending the action brought by Jennings. Peti-

tioner was not joined as a defendant simply because he was

Jennings’ opponent in the election. It was his position as

the incumbent president of the IUE and Jennings’ allega-

tion that petition, in performing his duties as an officer,

was not abiding by the IUE’s constitution that was the

basis of the legal action. As such, the expenses were

© The IUE constitution entrusts supervision of elections to five

trustees. (Article XXII, sections G-L.) The trustees are charged with

sole custody of ballots (section G), tabulating the vote (section H),

making an initial determination of the legality of ballots received

(section JO, and reporting the results of the election of the Secretary-

Treasurer of the IUE (section 1). If the legality of any ballots is

contested, a final determination is made by the IUE Executive Board

(section J). But see 73 Stat. 519, 534, 29 U.S.C., sec. 482. Although

| Continued on next page

nay

24

incurred because of an alleged illegal quality attributed to

acts which were being performed by petitioner in the

business of being the IUE president. It is well-established

that such expenses constitute ordinary and necessary

business expenses deductible under section 162. Commis-

sioner v. Tellier, supra; United States v. Gilmore, 372 US.

39 (1963); Peoples-Pittsburgh Trust Co., 21 B.T.A. 588

(1930), affd. 60 F. 2d 187 (C.A. 3, 1932).

Reviewed by the Court.

Decision will be entered

under Rule 50.

RAUM, J., did not participate in the consideration or

disposition of this case.

TIETJENS, J., concurring: I agree in the result here.

However, I do not think we have to go around Robin

Hood’s Barn to keep from opening up Pandora’s Box as

envisioned in Judge Tannenwald’s concurring opinion in

David J. Primuth, 54 T.C. 374. This case may or may not

depend on what we said in Primuth. It is does, I think

Primuth was wrong—as I said in my dissent in Primuth,

Supra and repeated in my concurrence in Guy R. Motto, 54

T.C. 558. But I think this case fits precisely in the mold of

McDonald v. Commissioner, 323 U.S. 57; Vernon v. Com-

missioner, 286 F.2d 173; and Mays v. Bowers, 201 F.2d

401—without reliance on “public policy.” I am not sure

how much “public policy” had to do with the Supreme

Court’s decision in McDonald. It was a close decision. |

have some doubt about what the basis of the conclusion

Footnote 6 continued from page A-11

it is not altogether clear, it appears that Jennings’ complaint, in part,

was concerned with petitioner’s role as chairman of the TUE Execv-

tive Board and his influence on its rulings on contested ballots.

SL BALL OE ELE S *

there was, but I’d rather have the Supreme Court take

another look at it, then have us try to get around Primuth

here by saying that “public policy” dictated the result in

McDonald.

DRENNEN, WITHEY, ATKINS, SCOTT and HOYT,

JJ., agree with this concurring opinion.

SIMPSON, J., dissenting: Although | respect the

majority’s attempt to reconcile the decisions in Primuth

and McDonald, | am not convinced; in my opinion, Mr.

Carey’s expenses of seeking re-election should be deducti-

ble. In general, I agree with the views of Judge Sterrett, but

I would like to add the following comments.

To me, it is indisputable that the expenses of seeking

re-election were incurred by Mr. Carey in his business; they

were reasonable in amount and were incurred in an unsuc-

cessful attempt to remain as president of the union. Since

he was unsuccessful, they should all be deductible in the

year when paid, and we need not consider whether, if he

had been successful, they should all be deductible in a

single year or should be charged off over the term of his

office.

If a deduction for these business expenses is to be

disallowed, it must be done on the basis that it is contrary

to public policy to allow a deduction for such expenses. In

Commissioner v. Tellier, 383 U.S. 687, 694 (1966), the

Supreme Court reiterated the long-standing rule when it

said, “Only where the allowance of a deduction would

‘frustrate sharply defined national or state policies proscrib-

ing particular types of conduct’ have we upheld its disal-

lowance.” When a payment is contrary to law, such as a

bribe or a kickback, to allow a deduction for such payment

would clearly frustrate the policy which makes the pay-

ment illegal. Similarly, to allow a deduction for a fine or

penalty would have the effect of mitigating the penalty and

~

thereby undermine the law which provided the penalty.

However, when we were faced with the question of the

deductibility of payments in settlement of a claim for

compensatory and punitive damages under the “False

Claims Act,” we held, in effect, that it was for the Con-

gress, not the courts, to decide whether a deduction should

be disallowed on the basis of public policy. Grossman &

Sons, Inc., 48 T.C. 15 (1967).

When Congress recently amended section 162 to pro-

vide that certain punitive damages were not deductible, it

also included in the statute the rulings that certain other

payments were not deductible because they were contrary

to public policy. Sec. 902, Tax Reform Act of 1969. At

that time, the report of the Senate Finance Committee

included that statement that:

The provision for the denial of the deduction for

payments in these situations which are deemed to

violate public policy is intended to be all in-

clusive. Public policy, in other circumstances,

generally is not sufficiently clearly defined to

justify the disallowance of deductions. * * * [S.

Rept. No. 91-552, 91st Cong., Ist Sess., p. 274

(1969), 1969-3 C.B. 423.]

The committee apparently felt that it was for Congress to

decide when deductions should be denied for reasons of

public policy, and I generally agree.

It is true that Congress has undertaken to regulate the

conduct of union elections, but in those provisions, I see

nothing indicating that the expenses of conducting an elec-

tion should not be deductible for tax purposes. Clearly,

anyone who seeks election to a union office is likely to

incur expenses, and the payment of such expenses is surely

not illegal. On the contrary, anyone who stands for such an

office must present himself and his views for the considera-

SLEPT eS OPS MO NT ri od

27

tion of the members of the union, and to do SO is altogeth-

er consistent with our democratic traditions. If there is any

risk that some candidates might engage in undue campaign-

ing and incur excessive expenses in an attempt to secure

union office, it seems to me that the appropriate remedy is

not to disallow a deduction for all such expenses. So far,

Congress has manifested no concern over such possibilities,

but if it does become concerned, it can fashion a far more

suitable remedy. ;

As a court, we have a responsibility to implement the

general policies declared by the Congress, but here we have

no policy declared by Congress. The majority of the Court

has decided, for reasons of public policy, to deny a deduc-

tion for the expenses of seeking a union office. I consider

that a policy question which should be decided by the

elected members of the Congress.

FAY, DAWSON AND STERRETT, JJ., agree with this

dissent.

STERRETT, J., dissenting: I respectfully dissent from

the holding reached by the majority for the reasons set

forth below.

As has been made clear the issue here is the deducti-

bility under section 162 of certain election expenses in-

curred in 1965 by petitioner James Carey. Paraphrased,

section 162(a) allows a deduction for all expenses which

are (1) ordinary and necessary, and (2) incurred in carrying

on (3) a trade or business.

Treating these requirements in reverse order, it cannot

be fairly disputed that petitioner was in the trade or busi-

ness of being a labor leader. This conclusion is made ap-

parent by reference to the majority’s own Findings of Fact

found on page [3], and I do not interpret its opinion to

hold to the contrary. Further, such a determination is in

28

accord with the many court decisions which have held that

an individual may be in the trade or business of being a

corporate executive. See Trent v. Commissioner, 291 F.2d

669, 674 (C.A. 2, 1961) and cases cited therein.

Moving backward to (2) above, it has been frequently

stated that “‘* ** carrying on any trade or business’,

within the contemplation of [sec. 162] * * * involves hold-

ing one’s self out to others as engaged in the selling of

goods or services.” Deputy v. DuPont, 308 U.S. 488, 499

(1940), concurring opinion of Justice Frankfurter. Since

the early 1930’s petitioner has held himself out to be labor

leader and has over the years engaged in continuous activi-

ties in furtherance of his trade in mostly elected, but some

non-elected, capacities. That such service was at all times

profitable in terms of receiving a salary can be safety

assumed. -

It seems clear, then, that the funds expended in 1965

were an integral part of his activities in carrying on his

trade or business and bore the requisite nexus to income.

Nothing could be less remote, no connection could be more

taut than the relationship between election expenditures

and the compensation accompanying the office sought.

With his long success as a labor leader, petitioner could

reasonably anticipate that any dollar spent in an election

expense would result in his continuing to draw a salary as

president of the union. Surely when an established labor |

leader compaigns for a union office, he is carrying on a

basic element of his trade.

Finally, even though it is found that the expenses at

issue were incurred by petitioner in carrying on his own

trade, such expenses still must be ordinary and necessary to

be deductible. Here, we must be realistic, election expen-

ditures are frequently the sine qua non of winning. Any

income flowing from victory can, almost inevitably, be

PRN AGE IE RTT PEF . ? g

—

attributed in part to the campaign expenditures. To be

“ordinary and necessary”’ the expenses must be reasonable.

Commissioner v. Lincoln Electric Co., 176 F. 2d 815 (C.A.

6, 1949). Petitioner deducted an amount of $16,070.22 as

his share of the campaign expenses designed to re-elect him

to an office bearing a 2-year term with an annual salary of

$25,500. The expenses in relation to the prospective

income must be deemed reasonable. There was no effort

here to “buy” an election, and the restriction on “reason-

ableness” would present anyone from deducting election

expenses if there were such an effort.

The majority would position this case somewhere

between McDonald v. Commissioner, 323 U.S. 577 (1944)

and David J. Primuth, 54 T.C. 374 (1970). I view the case

as being more between McDonald, supra, which disallowed

a deduction for election expenses of a would-be judge, and

Graham v. Commissioner, 326 F. 2d 878 (C.A. 4, 1964)!,

which allowed the deduction of proxy expenses designed in

part to elect the taxpayer to a corporate board of directors.

The McDonald disallowance of election expenses in-

curred in running for public office has been interpreted as

being based on public policy.” Mays v. Bowers, 201 F. 2d

*

1. While the Graham case dealt with the deductibility under

section 212 of the expenses there in issue, “[n]o reason appears why

a different construction should be given to the same language in

Section 162(a).” Locke Manufacturing Companies v. United States,

237 F. Supp. 80, 87 (D. Conn. 1964). It must be conceded that the

court in Graham discussed the question of deductibility mainly in

terms of the taxpayer’s stock holdings. Nevertheless, part of the

expenses at issue related to his seeking election to the board of

directors and, as noted above, were allowed.

. 2 A review of the briefs filed with the Supreme Court reveals

that the parties framed the issue as one involving public policy.

30

401 (C.A. 4, 1953). See 4A Mertens, Law of Federal

Income Taxation, sec. 25.21. Certainly, as the majority

itself points out on page [8], the Supreme Court seemed to

be limiting its opinion to the facts there at hand and

leaving to other courts the detailed analysis of special

circumstances.

Respondent, too, it would seem, has limited his appli-

cation of McDonald to its facts. Certainly his acquiescence

in Furner v. Commissioner, 393 F. 2d 292 (C.A. 7, 1968),

as stated in Rev. Rul. 68-591, 1968-2 C.B. 73, recognizes

that an employee’s expenses, to be deductible, need not

necessarily be related to any current employment. See also

Rev. Rul. 60-223, 1960-1 C.B. 57.

The application of public policy considerations to dis-

allow the deduction of otherwise allowable items should be

restricted. For the future, at least, it has been , see S. Rept.

No. 91-552, 91st Cong., Ist Sess. (1969), 1969-3 C.B. 597,

which accompanied the Tax Reform Act of 1969. There is

no need to disallow the election expenses of a union

official on the basis of public policy any more than those

of a corporate officer. Unions are much like corporations.

The majority emphasizes the governmental regulation of

unions; the short answer to that is a reference to the

Securities Exchange Commission as _ illustrative of the

governmental regulation of the activities of corporations.

Public policy considerations should be limited to campaign

expenses incurred in running for public office.

In Welch v. Helvering, 290 U.S. 111 (1933), at 115,

the Supreme Court, in discussing a predecessor of section

162, said:

The standard set up by the statute is not a rule

of law; it is rather a way of life. Life in all its

fullness must supply the answer to the riddle.

_ a

Surely it is a way of life, in any effort to win a contested

union election (or any contested election for that matter),

to cast “honest bread” upon the waters, hoping to bring to

shore the emoluments and other perquisites of the office at

stake. Where the “cast” has been reasonable in amount and

in furtherance of one’s trade, there is no justification for

ignoring the facts of life by denying the business nature of

the expenditure. If the election effort proves unsuccessful

the nature of the expenditures, obviously, has not been

altered.

For the foregoing, it is apparent that I would allow

the deduction at issue as readily falling within the scope of

section 162(a).

FAY, DAWSON, SIMPSON and QUEALY, JJ, agree

with this dissent.

' —

oF

a

32

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 71-2047

James B. Carey and Margaret Carey,

Appellants,

Commissioner of Internal Revenue,

Appellee

On Appeal from the Decision of the Tax Court of the

United States.

(Argued May 10, 1972 Decided May 16, 1972)

Before WINTER and FIELD, Circuit Judges, and

BLATT, District Judge.

PER CURIAM:

For reasons sufficiently stated by the Tax Court,

212 or the Internal Revenue Code of 1954.

AFFIRMED.

rs VE ORT er re

33

APPENDIX C

Internal Revenue Code of 1954

Section 162(a):

(a) In general._There shall be allowed as a

deduction all the ordinary and necessary expenses

paid or incurred during the taxable year in carry-

ing on any trade or business, * * *

Section 212(1):

In the case of an individual, there shall be

allowed as a deduction all the ordinary and neces-

sary expenses paid or incurred during the taxable

year—

(1) for the production or collection of in-

come; * * *

Treasury Regulations on Income Tax (1954 Code)

Section 1.162-20(c\(1):

(c) Taxable years beginning after December

31, 1962—(1) In general. For taxable years begin-

ning after December 31, 1962, certain types of

expenses incurred with respect to legislative mat-

ters are deductible under section 162(a) if they

otherwise meet the requirements of the regula-

tions under section 162. These deductible ex-

penses are described in subparagraph (2) of this

paragraph. All other expenditures for lobbying

purposes, for the promotion or defeat of legisla-

tion (see paragraph (b\(2) of this section), for

political campaign purposes (including the sup-

port of or opposition to any candidate for public

34

office). or for carrying on propaganda (including

advertising) relating to any of the foregoing pur-

poses are not deductible from gross income for

such taxable years. * * *

Section 1.21 2-1(f):

(f) Among expenditures not allowable as

deductions under section 212 are the following

Commuter’s expenses: expenses of taking special

courses or training: expenses for improving per-

sonal appearance; th cost of rental of a safe-

deposit box for storing jewelry and other per-

sonal effects: expenses such as those paid or in-

curred in seeking employment or in placing one-

self in a position to begin rendering personal

services for compensation; campaign expenses of

a candidate for public office, bar examination

fees and other expenses paid or incurred in secur-

ing admission to the bar, and corresponding fees

and expenses paid or incurred by physicians.

dentists, accountants, and other taxpayers for

securing the right to practice their respective pro-

fessions. See, however, section 162 and the reg-

ulations thereunder.

Labor-Management Reporting and Disclosure Act of 1959

Section 481(c):

(c) Every national or international labor

organization, except a federation of national or

international labor organizations, and every local

labor organization, and its officers, shall be under

a duty, enforceable at the suit of any bona fide

candidate for office in such labor organization in

the district court of the United States in which

such labor organization maintains its principal

office, to comply with all reasonable requests of

+ Oey

ITH HEMI PET Lo

THE aH uly 3h

Te HE

tiene Usa

JT Hn Pa a

36

of any person in an election subject to the

provisions of this subchapter. Such moneys of a

labor organization may be utilized for notices,

factual statements of issues not involving can-

didates, and other expenses necessary for the

holding of an election.

APPENDIX D

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 71-2047

James B. Carey and Margaret Carey,

; Appellants,

: versus

§ Commissioner of Internal Revenue,

: Appellee.

—ORDER-—

: on ;

2 The petition for rehearing filed on behalf of James B.

| Carey and Margaret Carey having been read and considered, it

is, with the concurrence of Judge Field and Judge Blatt,

: O R DE RE D, that said petition be, and it is

j hereby, denied.

: For the Court:

_3/ Harrison L. Winter

United States Circuit Judge

‘A True Copy, Teste: FILED

> Samuel W. Phillips, Clerk JUN 12 1972°

> By s/ Diane Burke Samuel W. Phillips

: Deputy Clerk CLERK

— Ey

at ——_-- -