1930 BTA LEXIS 2292 | B.T.A. | 1930
Lead Opinion
It is alleged that the respondent erred in refusing to allow as a business expense the payment by Charles C. Knowlton of $8,000 to George A. Hammond in each of the taxable years 1920 to 1923, inclusive, and $6,000 in the year 1924.
The taxing acts allow as deductions “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” If the payments by the decedent to Hammond do not meet this requirement, they may not be deducted and it is unnecessary to inquire further in an attempt to classify them. That the payment related to the business interests of the taxpayer and was to be made annually under a contract is insufficient to permit the deduction. We must go back and learn the purpose and result of the contract under which the payments were made.
The obligation which the decedent assumed in 1917 was properly that of the corporation of which he was the principal stockholder. It is conceivable that the consolidation might have proceeded and such corporation might have been continued in existence for the sole purpose of holding the stock of the new corporation and paying its
Decision will be entered under Rule 50.