45 T.C. 439, 1966 U.S. Tax Ct.
CASE SYNOPSIS: Petitioner taxpayer
filed an action against respondent Commissioner of Internal Revenue
(Commissioner), challenging the tax deficiency assessed predicated on
the latter's determination that the taxpayer could not deduct the
legal expenses incurred in defending against the taxpayer's wife's
action to set aside their antenuptial contract.
FACTS: The taxpayer's wife filed for divorce, and because of the divorce court's limited jurisdiction, filed a separate action in another court to set aside the parties' antenuptial contract. On his tax return, the taxpayer deducted the legal expenses incurred in defending against the action on the contract. The Commissioner denied the deduction. On appeal, the court entered judgment for the Commissioner.
HOLDING:
The court found that the legal expenses did not involve consultation or advice on tax matters and therefore were not deductible pursuant to 26 U.S.C.S. § 212(3) as expenses paid in connection with determination of a tax.
ANALYSIS:
The taxpayer argued that the expenses were for the preservation of inherited property and therefore deductible pursuant to 26 U.S.C.S. § 212(2) as expenses for property held for income production. The court stated that in ascertaining the source of claims giving rise to legal expenses, the test was whether the claim would have existed "but for" the marriage relationship. The court held that but for her marriage to the taxpayer, the wife would have had no claim to the property the taxpayer claimed he was protecting and the legal fees were therefore personal expenses.
CONCLUSION: The court rendered judgment for the Commissioner in the taxpayer's action challenging the tax deficiency assessed when the Commissioner denied the deduction claimed by the taxpayer for the legal expenses he incurred in defending against his wife's action to set aside the couple's antenuptial contract.
FACTS: The taxpayer's wife filed for divorce, and because of the divorce court's limited jurisdiction, filed a separate action in another court to set aside the parties' antenuptial contract. On his tax return, the taxpayer deducted the legal expenses incurred in defending against the action on the contract. The Commissioner denied the deduction. On appeal, the court entered judgment for the Commissioner.
HOLDING:
The court found that the legal expenses did not involve consultation or advice on tax matters and therefore were not deductible pursuant to 26 U.S.C.S. § 212(3) as expenses paid in connection with determination of a tax.
ANALYSIS:
The taxpayer argued that the expenses were for the preservation of inherited property and therefore deductible pursuant to 26 U.S.C.S. § 212(2) as expenses for property held for income production. The court stated that in ascertaining the source of claims giving rise to legal expenses, the test was whether the claim would have existed "but for" the marriage relationship. The court held that but for her marriage to the taxpayer, the wife would have had no claim to the property the taxpayer claimed he was protecting and the legal fees were therefore personal expenses.
CONCLUSION: The court rendered judgment for the Commissioner in the taxpayer's action challenging the tax deficiency assessed when the Commissioner denied the deduction claimed by the taxpayer for the legal expenses he incurred in defending against his wife's action to set aside the couple's antenuptial contract.
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