Goedel v. Commissioner

HERMAN GOEDEL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Goedel v. Commissioner Docket No. 84118. United States Board of Tax Appeals 39 B.T.A. 1; 1939 BTA LEXIS 1084; January 3, 1939, Promulgated *1084 Where a partnership, dealers in securities, took out a policy of insurance from an English company on the life of the President of the United States for the purpose of protecting their holdings in securities against possible loss if the President should die within a certain period, held, the premiums paid are not deductible as ordinary and necessary expenses of carrying on their business under section 23(a), Revenue Act of 1932. Norman W. Schur, Esq., for the petitioner. E. M. Woolf, Esq., for the respondent. HARRON *1 The respondent has determined a deficiency against the petitioner in the amount of $610.94 for the taxable year 1933. The petitioner alleges that the respondent erred in adding to his taxable income the sum of $1,211.31, claimed in the income tax return of the partnership of which he was a member as a deductible business expense in a total of premiums for insurance in the amount of $23,102.97. The Commissioner disallowed the partnership the total for premiums claimed as a deduction by it, and added to petitioner's taxable income his proportionate share of the expense. Petitioner does not question the respondent's disallowance*1085 of a deduction of certain contributions. FINDINGS OF FACT. Petitioner is an individual, with his place of business at 47 Broad Street, New York, New York. During the taxable year 1933 petitioner was a member of the partnership of Jacquelin & De Coppet, dealers in odd lots of stock traded in upon the New York Stock Exchange. The term "odd lot" means a number of shares less than the unit of trading on the New York Stock Exchange, which is 100 shares. *2 The partnership deals with various commission houses, or stock brokers, who deal directly with the purchasers and sellers of securities. It is the policly of the firm to fill all orders which it receives from the brokers. It does not deal directly with the individual purchasers. The income of the partnership is derived largely from the profit on purchases and sales of securities. During 1931 the inventory of the partnership averaged 32,210 shares. During 1932 it averaged 49,860 shares. In 1933 the amangement thought securities were very cheap and, commencing in April 1933, allowed its security holdings to increase very materially over its average for the previous two years, in anticipation of a demand for odd*1086 lots of securities. On May 1, 1933, its inventory was 96, 406 shares; on May 6, 1933, it was 83,002 shares; on June 13, 1933, it was 111.497 shares; and on May 4, 1935, it was 72,318 shares. Edward C. Fiedler, a member of the partnership actively engaged in its management, in 1933 discussed with the partners and other dealers and brokers the probable future trend of the securities market. There was a general opinion in the minds of brokers, dealers. and the partners that there would be better conditions in the country and that market prices of securities would continue to rise. One of the factors they considered in forming this opinion was that a new administration had come in and they believed that the President of the United States had been given great powers and that it would be a calamity if anything should happen to business at that time. The partnership followed a policy of maintaining as small a position as possible with respect to the relation of the size of its inventory of securities to the anticipated demand. In April 1933 the firm allowed its security holdings to increase materially over its average for the previous two years and accumulated securities because*1087 it believed prices were cheap and that, under the new administration, it was very opportune to have a larger position in securities. A long position was desired in anticipation of increased demand. Fiedler conceived the idea of obtaining insurance on the life of Franklin Delano Roosevelt, President of the United States, and consulted his partners regarding such proposal. The firm had a very large inventory of securities at the time and desired to protect it if possible. The purpose was to cover the possiblity of a loss on the inventory and that was all the partnership wanted to cover. Fiedler's idea was motivated by an experience he had in 1908, when he was in the commission business. His business then had a large interest in a deal in certain railway stock and he was of the opinion that the deal would not go through if anything happened to the president of another interested railway company. At that time he had thought of taking out a policy on the life of the president of the railway company, *3 but did not do so. The president of the railway company died within a year and the stock in which Fiedler was then interested had a very bad decline in price. Fiedler believed*1088 that loss could have been covered if he had had insurance on the life of the railway president. In 1933 Fiedler thought that security prices would decline greatly if the President of the United States should die. In such event, he believed the partnership might suffer great losses from its large holdings of securities accumulated in 1933. He knew that fluctuations in the market are one of the normal risks of the business of a dealer in securities and that fluctuations in the market are due to many economic factors. However, he considered the situation in 1933 unique for his own reasons. The partnership had never before attempted to carry any form of insurance against declines in the market to protect prior accumulations of inventory that had been smaller than that in 1933. In April 1933 Fiedler consulted Edwin Stewart, president of Stewart, Collins & Stewart, insurance brokers, in New York, as to whether it would be possible to purchase insurance on the life of the President of the United States, and explained that his firm found themselves in a long position on stocks which he felt conditions warranted continuing if nothing unforeseen happened to deprive the Government of*1089 the President. After an exchange of cables, Stewart, on April 28, 1933, wrote to the London correspondent of his firm, B. M. Collins & Co., as follows: Attached is confirmation of cables which have passed between us in connection with the inquiry and firm order resulting from Jacquelin & De Coppet. When inquiry was put to us on Wednesday last we were rather at a loss as to the wording we should use in putting the matter up to you as, of course, a cover of this kind must be treated for business as well as personal reasons in the greatest secrecy. We felt, however, on receiving your cable of the twenty-seventh that you understood that what we were seeking was a life insurance cover in the amount of $500,000, which would pay to our assured, Jacquelin & De Coppet this amount in the event of death for any reason whatsoever of President Roosevelt during the next year. We have tried to explain the insurance interest of our clients in today's cable but we would give you details as follows: Jacquelin & De Coppet are the largest odd lot stock brokers on the New York Stock Exchange and they have been in business for many many years. Their business is all in dealing with other stock*1090 brokers and executing orders for shares in less than 100 share lots as the rule of the Stock Exchange is that orders are only executed on the big board in 100 share lots. Of course, a hause dealing in hundreds of thousands of odd lot shares a day must, by necessity, take a position and by that we mean purchase outright for their own account sufficient number of hundred share lots so that they can meet the requirements of their broker clients for say - 25 share lots. The head of Jacquelin & De Coppet, who is a very close friend of the writer, Mr. Edward Fiedler, and who by the way is also a Governor of the Stock *4 Exchange, feels that the present Federal Administration is going to accomplish a great deal of good during the next year under the leadership of President Roosevelt and that the trend of the stock market will be an upward trend and that therefore the position that they take in the different stocks in which they deal must be a long one and not a short one. In other words, they must not depend on the market going down and being able to buy stocks cheaper during the summer months particularly. This being the case they feel that they should make a considerable*1091 cash investment at this time in all classes of shares in which they are dealing and, of course, if they are not able to sell these broken up into odd lots at the price they paid or better they stand a considerable loss. They are quite prepared to stand the usual market loss or gain but they feel that President Roosevelt is leading the Administration as an individual and that if anything happens to him during the next year the chaotic condition which, of course, would occur for at least a brief period of time, would materially affect the prices of stocks and that therefore our clients would find themselves having purchased stocks at a high price and being forced to sell them at a very low price. Before the order was given to us today Mr. Fiedler discussed the matter with Mr. Richard Whitney, President of the New York Stock Exchange and received his approval of the insurance plan so that everything is absolutely on a business-like basis. Regarding your last cable stating that the cover must be written in Sterling, we are hoping and assuming this is due to the fact that we asked you to obtain a market for a million dollars of coverage instead of $500,000 as first cabled and we*1092 trust that your first cable of 5% for $500,000 of coverage can be completed as we think that both you and Underwriters will be able to see that it is not quite fair to ask our assured to not only take a position against market fluctuation but also take a position by buying this insurance in Sterling in foreign exchange. The mail is just closing so will say nothing further now but we trust that by the time this letter is received the cover will be colsed down and we will have received definite cable advices from you to this effect. Following these negotiations a "Proposal for Assurance," dated May 15, 1933, was submitted to the Equity & Law Life Assurance Society of London, which was signed by a partner of and for Jacquelin & De Coppet. The proposal was for assurance on the life of Franklin Delano Roosevelt, President of the United States of America, in the sum of Pound 60,000, without profits for a one-year term. The assurance was to be effected by Jacquelin & De Coppet, 43 Broad St., New York. The nature of the pecuniary interest was stated to be "Protection of Investments." The provisions for medical examination were crossed off as well as other questions that could only*1093 be answered by the person whose life was to be assured and the proposal was not signed by the person whose life was to be assured. The Equity & Law Life Assurance Society issued policy No. L. 33073 on May 16, 1933, which provides in part as follows: sum assured, Pound 60,000; the assured, Messrs. Jacquelin & De Coppet of 43 Broad St., New York, stock brokers; the life assured, Franklin Delano Roosevelt, President of the United States; age of the life *5 assured, stated but not admitted proved; the event on the happening of which the sum assured is to become payable, the death of the life assured before or on May 5, 1934. The policy is a term without profits policy. The premium was a single premium of pound 3,150. This was paid to Stewart, Collins & Stewart by check of Jacquelin & De Coppet, May 8, 1933, in the amount of $12,600. Under date of June 13, 1933, a second "Proposal for Assurance" for the term of one year in the sum of pound 48,250 was made to the Equity & Law Life Assurance Society of London for assurance on the life of Franklin Delano Roosevelt, President of the United States, by Jacquelin & De Coppet. Except as to amount, the proposal was similar to the*1094 one of May 15, 1933. It was not signed by the person whose life was to be assured. A policy of insurance, No. L. 33202, was issued by the Equity & Law Life Assurance Society on June 28, 1933, under this proposal, in the amount of pound 48,250. The policy provided that the latter amount would be paid Jacquelin & De Coppet if the life assured should die on or before June 12, 1934. The policy was in its terms the same as the first policy, except as to dates and amounts. The premium in the amount $10of,502.97 was paid by Jacquelin & De Coppet by check to Stewart, Collins & Stewart, dated June 13, 1933. Upon the expiration of the two policies referred to above, the partnership on or about May 6, 1934, renewed the insurance for one year to May 5, 1925. A new policy, No. T. 34039, was issued by the Equity & Law Life Assurance Society in the sum of pound 100,000. The partnership paid a premium on April 26, 1934, of $37,389.10. This policy expired May 5, 1935, and was not thereafter renewed. In its income tax return for the year 1933 the partnership deducted the total amount of premiums paid in 1933 one the policies of insurance on the life of President Roosevelt, $23,102.97, *1095 as a business expense. This amount was disallowed by the Commissioner. The petitioner reported in his individual income tax return his share of the net income of the partnership, and this net amount was an amount, less $1,211.31, which was petitioner's proportionate share in the total amount of the premiums paid by the partnership. In determining petitioner's income tax liability for 1933, respondent added the amount of $1,211.31 to the partnership income reported by petitioner in his own return in view of the Commissioner's disallowance of the deduction by the partnership of $23,102.97, the amount of the premiums, in computation of the partnership net income. OPINION. HARRON: The petitioner's liability for income tax upon an amount added to his share of income received in 1933 from the copartnership *6 of Jacquelin & De Coppet, depends upon whether certain insurance premiums are deductible from the income of that copartnership as ordinary and necessary expenses incurred in carrying on its trade or business.1 The insurance in question was insurance for a term on the life of the President of the United States. We do not have to consider any question relating to the*1096 refinements of insurance law, i.e., whether or not the insurance was life insurance. For the purposes of considering the issue before us, there can be no question that the insurance premiums are premiums paid on insurance on the life of an individual and that the beneficiary of the policies was the taxpayer, who took out the policies. The deduction for the premiums is allowable only if it is an ordinary and necessary expense of the business. . We do not believe it necessary to consider a related question, namely, whether the expenditure comes within the intendment of the section relating to nonallowable deductions, namely, section 24(a)(4) of the Revenue Act of 1932. *1097 Respondent denied the deduction on the ground that the expenditure in question has no relation to the profit-making activities of the business and is not the type of expenditure deductible under section 23(a) of the Revenue Act of 1932. Petitioner has the burden of proving that the respondent's determination is wrong. Wickwire v. Reinecke, 275U.S. 101. Respondent contends that the expenditure is not deductible as an ordinary and necessary business expense; that the partnership did not have an insurable interest in the life of the President of the United States; and that the policies for which the premiums were paid were void as against public policy. Petitioner contends that the expenditures for the insurance premiums are such expenses as are deductible under section 23(a) because the business interests of the copartnership were the immediate cause for incurring the expense and because the members of the copartnership made the expenditure in good faith upon the belief that the expenditure was necessary in view of an unusually large inventory of securities accumulated in the early part of 1933, as well as for other reasons evident from the findings of fact. The petitioner*1098 contends that the expenditure was a necessary one in that presumably prudent business men, i.e., the members of the copartnership, considered that the expenditure was necessary for the protection of their investments *7 in their business. Petitioner contends that the insurance was a form of business insurance to protect an inventory of goods or that it is similar to expenditures made in hedging operations, which are undertaken to reduce the element of speculative risks on a market. Petitioner contends that continuance of the life of the President of the United States was of advantage to the business of the copartnership and that it had an insurable interest in the life of the President. In this connection, we are asked to take notice of the events of deaths of two former Presidents of the United States, President McKinley and President Garfield, and of the fact that following each demise, market prices of securities declined severely; also, that in standard works on insurance law it is reported that stockholders in companies financed by J. Pierpont Morgan have taken out insurance on his life. Finally, it is contended that to be deductible an expenditure does not need to*1099 be both ordinary and necessary. Petitioner relies on , to support his argument that the statutory provision contained in section 23(a) is to be broadly construed and that the terms "ordinary" and "necessary" are not used conjunctively, i.e., that if the expenditure is "necessary" in the conduct of business, the requirement of the statute is met and the deduction should be allowed. To be deductible under section 23(a) the expenditure must meet all of three requirements; it must be both ordinary and necessary, and it must proximately result from the ordinary conduct of business. See Klein, Federal Income Taxation (1929), p. 394; . This Board has previously considered the decision of , and the substance of the court's opinion in that case and has pointed out that the Supreme Court in , in construing an identical provision of the revenue acts, has given a construction to the statute, contrary to that of the Circuit Court in the Harris case. The Supreme Court has made clear*1100 the rule that a business expense, to be deductible under the business expense provision of the statute, must be not only a necessary expense but also an ordinary expense. See . While there is a great difference in the nature of the facts and circumstances surrounding the expenditures involved in this proceeding as compared with the expenditures, facts, and circumstances in the Welch v. Helvering case, the question in this proceeding is essentially the same as the question involved in the Welch case. It is pertinent and helpful to quote at length from the Court's opinion in The Court said there: We may assume that the payments to creditors of the Welch Company were necessary for the development of the petitioner's business, at least in the sense *8 that they were appropriate and helpful. . He certainly thought they were, and we should be slow to override his judgment. But the problem is not solved when the payments are characterized as necessary. Many necessary payments are charges upon*1101 capital. There is need to determine whether they are both necessary and ordinary. Now, what is ordinary, though there must always be a strain of constancy within it, is none the less a variable affected by time and place and circumstance. 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. Cf. . The situation is unique in the life of the individual affected, but not in the life of the group, the community, of which he is a part. At such times there are norms of conduct that help to stabilize our judgment, and make it certain and objective. The instance is not erratic, but is brought within a known type. The first question is whether the expenditure*1102 for the particular insurance premiums was an ordinary expense. On its face, an expenditure for insurance on the life of the President of the United States by a firm dealing in securities, under the facts, is not ordinary in the sense of being customary or usual. The only grounds upon which petitioner claims that the expenditures are deductible are (1) that the general condition of the securities market, in early 1933, and the partnership's "long" position, was unusual, and (2) that the "insurance" purchased was similar to "business" insurance. (1) Considering the first basis for petitioner's claim, it appears that Jacquelin & De Coppet took a "long" position in its purchases of securities, investing large sums in early 1933 to take advantage of cheap prices for securities. Large purchases were made early in the year instead of spreading purchases more evenly over the year. It must be assumed that other dealers in securities may have taken a "long" position in securities at about the same time. It is reasonable that others would avail themselves of the then prevailing low market prices. It is admitted that one of the risks of the business of any dealer in securities is fluctuations*1103 of market prices of securities. Any dealer in securities assumes proportionate increases of this risk when he undertakes to buy and accumulate a large inventory of securities. Jacquelin & De Coppet is a large firm in their business, no doubt larger than most firms of dealers. But its desire to find some way of insuring against loss a large inventory of securities can not be regarded as essentially any different from what must be the desire of every dealer to protect his inventory of securities from loss from declines in prices. In the absence of any evidence to show that others in the same business at the same time purchased similar or *9 the same insurance, it must be concluded that there was really no extraordinary or unusual aspect to the position of Jacquelin & De Coppet, in early 1933, that would make the expenditure in question an ordinary expenditure within the meaning of the statutory provision. If low prices and new business confidence are favorable factors to the business of buying securities for sale at a profit, the condition of the securities market in early 1933 was very good. The morbid contingency that the copartnership sought protection against was entertained, *1104 so far as the record shows, only by members of the copartnership to the point of purchasing "insurance" on the life of the Chief Executive. Judged by normal standards of conduct in the securities business, in so far as the record before us shows, the means employed by the copartnership was not in accord with any prevailing business practice. It must be concluded that the expenditures in question were not ordinary business expenses, because of any conditions peculiar to the copartnership. (2) It is generally recognized that the purchase of insurance to cover property loss is ordinary and prudent business practice. But there are risks incident to the conduct of the securities business that can not be insured, as a practical matter. One of petitioner's witnesses testified that he did not know of any customary, established form of insurance that would cover losses of a dealer in securities against fluctuations in market prices. It is an essential characteristic of insurance that there be a proximate relation between the loss sustained and both the event insured against and the indemnity received. Thus, fire insurance is insurance against loss proximately caused by fire and the*1105 amount which the underwriter agrees to pay is the amount of the loss sustained, which may be less than the face amount of the policy purchased. The "insurance" purchased by Jacquelin & De Coppet did not, by its terms, refer to loss from the sales of securities within a specified time. Such possible losses were contemplated by the copartnership, of course. But the event insured against was the demise of the President. Such event was not only remote but also is only one of the many possible causes of fluctuations in market prices. The policies purchased were contracts to pay a sum certain and no less, in the event of the death of the life assured on or before a certain date. While it may have been agreed outside the terms of the particular insurance contracts that no payments would be made if no losses from sales of securities were sustained, nevertheless there was no contractual limitation of indemnity to be paid to actual losses that might be sustained. Thus, there was lacking in these contracts the essential characteristic of insurance, i.e., the co-relation of indemnity to be paid to loss sustained. The contracts in many respects resemble wagering contracts. *10 *1106 A wager is defined in Funk & Wagnalls' Standard Dictionary as follows: Wager, An agreement between two or more persons that a certain sum of money or other thing shall be paid or delivered to one of them on the happening or not happening of a specified (but uncertain) event. It is urged that the "insurance" in question is the same or very similar to what is called "business insurance." We understand this reference to be to such standard life insurance as is sometimes purchased by a business firm on the life of some individual closely related in some way to the business. The theory of such insurance is that the demise of the individual constitutes a loss to the business, because of the relation of the individual to the business, and the relationship is such that the beneficiary has an insurable interest in the life of the individual. There can be no question that the copartnership of Jacquelin & De Coppet did not have any insurable interest in the life of the President of the United States, upon any theory. It is an exceedingly novel theory that a business firm does have such insurable interest. Carried out, this theory amounts to saying that every business firm and every*1107 individual engaged in business in the United States has an insurable interest in the life of the President of the United States. The theory is not only fantastic but, if accepted, would introduce into the field of business insurance and business contracts grave questions of public policy. While it seems scarcely necessary to cite insurance law on the matter of what constitutes an insurable interest, and what constitutes a valid insurance contract, we refer to well known principles. In , an insurable interest is defined as follows: * * * such an interest, arising from the relations of the party paying the insurance either as a creditor of or surety for the assured, or from the ties by blood or marriage to him as will justify a reasonable expectation of advantage or benefit from the continuance of his life. It is well settled law in this country that a valid policy of insurance can not be taken out by one person for his own benefit on the life of another in which he has no insurable interest. 37 Corpus Juris 385; sec. 51; *1108 ;; . In New York State there is statutory provision against issuance of insurance on the life of another, except upon application of the person insured. The statute provides (McKinney's Consolidated Laws of New York, book 27, par. 55) that: * * * No policy or agreement for insurance other than a policy of group life insurance described in clause (d) of subdivision two of section one hundred *11 and one-a of this chapter shall be issued upon the life or health of another or against loss by disablement by accident except upon the application of the person insured; * * * When Jacquelin & De Coppet applied for and obtained the contracts under consideration here, the President of the United States did not sign the applications to an English assurance company for term insurance surance on his life. The negotiations appear to have been secret and from the record it is clear that the President was wholly unaware of the applications for and the issuance of the policies. *1109 It seems evident that the contracts entered into by Jacquelin & De Coppet with an English company were illegal under the laws of New York. While they may have been valid under the laws of England, a point we do not decide, it seems evident that the contracts were not enforceable in the State of New York. The law will not enforce what it has forbidden and denounced. "Contracts permissible by other countries are not enforceable in our courts, if they contravene our laws, our morality, or our public policy." [Italics ours.] Story, Conflict of Laws, sec. 258; . Judged by standards of what is ordinary, "according to the ways of conduct and forms of speech prevailing in the business world," ; and by what similar conduct arises under similar situations, , it is most doubtful whether other business concerns in New York State, or elsewhere in this country, accustomed to buying insurance in connection with their business, would expend funds of the business upon contracts in the nature*1110 of wagering contracts, subject to being defeated on grounds of invalidity and violation of public policy. We hold that the expenditures in question are not ordinary business expense within the meaning of section 23(a) of the Revenue Act of 1932. We do not believe the expenditure in question meets another requirement of a deductible business expense, i.e., it appears to us not to be an expenditure incurred in the normal course of business. The record reveals no facts to show that any business firm has ever purchased a policy of insurance on the life of the President of the United States without his own application for the insurance. Further, as stated above, the event insured against was not only remote, but also only one of the possible causes of fluctuations in the market prices of securities such as are found in bank and business failures, declaration of war, and what are generally described as economic factors, all of which are likely to occur irrespective of continuance of life of the Chief Executive of the country. *12 It is doubtful whether the expenditure was necessary, even in the sense of being "appropriate and helpful", with due regard for the theories*1111 that influenced members of the copartnership in making a large expenditure. Even in the considerations of the members of the copartnership, it does not appear from the record, that they thought there was any condition prevalent throughout the United States that created any emergency for or imminent danger to the business of dealers in securities such as to warrant obtaining such contracts. Cf. . Of course, there was a very remote chance that such expenditure would be of benefit to a business, but the members of the copartnership apparently were the only persons in their field of business who considered "necessary" such an expenditure. While conditions in 1933 may have been unusual as compared with prior years, and the position of the copartnership unique in 1933 with respect to its "long" position in securities, it appears from the record that the expenditure was wholly unique in the business history of this country. Where, as here, the expenditure is so unusual as never to have been made, so far as the record reveals, by other persons in the same business, when confronted with similar conditions, and*1112 we have particular reference to the fact that the insurance was upon the life of the President of the United States, then we do not think the expenditure was ordinary or necessary, so as to be a deductible business expense within the intendment and meaning of the statute. At best, the expenditure falls within "those general costs of protecting one's property for which the statute makes no allowance." . Upon our conclusion that the expenditures in question are not deductible business expenses under the revenue act, it is not encumbent upon us to make any conclusion upon any question of public policy. The determination of the Commissioner in this proceeding is sustained. Reviewed by the Board. Decision will be entered under Rule 50. LEECH concurs only in the result. SMITH SMITH, dissenting: I am of the opinion that a business enterprise which, as an incident to the carrying on of its trade or business, pays a premium on an insurance policy to insure itself against loss in entitled to deduct from its gross income the premium paid as an "ordinary and necessary" expense of carrying on the trade or*1113 business within the meaning of section 23(a) of the Revenue Act of 1932. If the insurance policy were a casualty insurance policy to insure against loss from theft, from storm, or from other casualty, I apprehend that no question would be raised as to the deductibility of the *13 item. I do not see how a different result can be reached where the policy is on the life of the President of the United States for a limited period. The character of the expense does not depend upon whether the apprehended loss is from the death of the President or from any other source. I am of the opinion that the premium is a legal deduction from gross income, in accordance with . In that case it was held that fees paid to an attorney for defending an action for accounting instituted by a former partner are deductible from gross income as ordinary and necessary expenses paid or incurred during the taxable year in carrying on the business, under section 214(a)(1) of the Revenue Act of 1918, since, where suit against the taxpayer is directly connected with business, the expense incurred is a business expense. The Court held that the*1114 expense proximately resulted from the carrying on of the business. That is the situation here. I do not think that the opinion of the Supreme Court in , is opposed. It seems to me that the language used by the Court in that opinion supports the contention of the petitioner herein. Footnotes 1. The Revenue Act of 1932, section 23, provides that: "In computing net income there shall be allowed as deductions: "(a) Expenses. - All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business * * *." Section 183 provides: "The net income of the partnership shall be computed in the same manner and on the same basis as in the case of an individual, except that the so-called 'charitable contribution' deduction provided in section 23(n) shall not be allowed." ↩