Saturday, May 4, 2013

Coughlin v. Commissioner case brief

Coughlin v. Commissioner case brief
203 F.2d 307, 1953 U.S. App. 53-1 U.S. Tax Cas. (CCH) P9321; 43 A.F.T.R. (P-H) 672

CASE SYNOPSIS: Petitioner lawyer challenged a decision of the United States Tax Court, upholding a disallowance of a deduction under I.R.C. § 23(a)(1)(A) as an ordinary and necessary expenses incurred in carrying on a trade/business and favoring respondent Commissioner of Internal Revenue. Alleged non-business expenses for attending an institute on federal taxation were disallowed because of the educational, and personal nature of object pursued by petitioner.

FACTS: The firm of petitioner lawyer relied on him to keep informed as to changes in the tax laws and cases. To do that, petitioner attended a yearly institute on federal taxation. He incurred reasonable expenses, which he claimed as an allowable deduction under I.R.C. § 23(a)(1)(A), as ordinary and necessary expenses incurred in carrying on a trade or business. Respondent Commissioner of Internal Revenue disallowed the deduction, and the federal tax court upheld the disallowance, finding the expenses were non-business expenses. The second circuit reversed the federal tax court's decision and remanded for the deduction allowance. Where the expense was incurred in a trade or business within the meaning of § 23(a)(1)(A), the regulation interpreting I.R.C. § 23(a)(2) was not a bar to allowance. Treas. Reg. 111, § 29.23(a)-5 made it clear that among the expenses deductible under § 23(a)(1)(A) were professional dues, subscriptions, and more. Expenses in the case were analogous to those expenses included as allowable deductions. Also, the professional need to incur the expenses in order to perform his work with due regard to the status of the law overshadowed the personal aspects.

CONCLUSION: The second circuit reversed the federal tax court's decision to uphold a deduction disallowance and remanded against respondent Commissioner of Internal Revenue because reasonable expenses were incurred for petitioner lawyer's attendance at an institute on federal taxation where they were found directly connected with the practice of his profession, and the professional need overshadowed the person aspect of the expenses.
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