Norman J. Fischer and Mary P. Fischer v. United States
490 F.2d 218
7th Cir.
1973
Check Treatment

*1 by office, employee posed deprived union but has threat choice its rights permitting employer to render a can- members of their an under 29 U.S.C. ineligible 481(e) election il- to nominate and for for union vote him. didate § judgment discharging Hyster Secretary legally him. is entitled to a Since declaring discharged of “the nature this election to null and because Wolfe directing union void and to conduct and extent of activities the Union (195 new and another election for Union NLRB nominations steward” president certainly 91), for the of would have disfavored office under it Secretary’s president. supervision. union Bottle his election as the Wirtz v. Blowers Local 88 S. candidacy its The Union admits Ct. 19 L.Ed.2d 705. requirement full-time em- active ployee Reversed and remanded. found unreasonable could be (Br. union the case of an international

22), it demonstrated to our has not being why its a 900-member

satisfaction

independent makes the rule somehow suggested that the un-

reasonable. It is president paid by Hyster,

ion Hyster and for non-employee pay vio-

late of the National Labor Section 302 (29 Relations Act U.S.C. § Whether that Section would be violated Mary Norman J. FISCHER and P. us, if cor- is not before rect, but the Union is Fischer, Plaintiffs-Appellants, position not in this case is its Hyster helped. The record shows that America, UNITED STATES pays president, spends union who Defendant-Appellee. full time union business and no does No. 72-1273. Hyster. pay- work for such Whether Appeals, violate not de- States Court ments does Seventh Circuit. pend on the union Hyster who whether no la- work for is or is not does Argued April employee. policy beled an Sec- Decided Dec. management tion is to reduce influ- employee representatives, ence over contrary purpose

it would be to that

construe the a manner which gave management option pay an pay salary

not to a union officer’s

designating designating him as not regard employee without to whether actually any performed work

company.

Finally, union if were elected Wolfe Hyster

president, would have to allow committing premises

him on to avoid its practice

an unfair labor under Section

8(a)(1) the National Labor Relations (29 158(a)(1)). Mid- Act U.S.C. § Company Transportation America Board, F.

National Labor Relations

2d only deprived

The Union has right a candidate

Wolfe *2 Schnur, Luce,

Kenneth Robert A. K. Wis., plaintiffs-appel- Milwaukee, lants. Atty. Gen., Crampton, Asst. Scott P. Bozarth, Atty., Div., U. H. Tax S.
James Dept, Justice, C., Washington, D. defendant-appellee. HASTINGS, Circuit Senior Before Judge,

Judge, CUMMINGS, Circuit Judge.* CAMPBELL, Senior District CAMPBELL, J. Senior WILLIAM Judge. District suit was com- income tax refund This for the Court menced in the District by the Eastern District of Wisconsin Mary P. plaintiffs, Norman J. stipu- The facts were either Fischer.1 agreed parties, and lated * party Mary Campbell to this action Judge P. Fischer William J. Senior District joint filing tax return her reason of is sit District of Illinois the Northern husband, designation. ting by her J. Fischer. Norman outstanding of the tax- “The reduction denial resulted the trial n > shares of common stock and the ac- payer’s affirm. refund claim. We exchange companying will shares undisputed facts show corresponding adjustments necessitate Fischer, taxpayer, Norman J. the conversion at which president board and a member convertible subordinated deben- 6%% Inc. Industries directors *3 may tures converted into the com- be “Medalists”), and that (hereafter company.” mon stock of the 12,015 of its common shares owned 30, taxpayer Additionally, had the On June 1967 Medalists notified stock. right plan option re- holders that it intended to qualified stock under a Medalists deem the on the next interest 25,000 of debentures purchase shares paying date, per 1, price of October 1967. at a common stock $6.00 incorporat- originally Medalists, share. Shortly July 27, thereafter, on about Nash Com- of J. M. ed under the name 1967, two debenture holders as- Inc., of athletic pany, manufacturer is a provision serted that was no in the there woodworking ma- equipment, automated April 1, debenture indenture for an products, other chinery, iron ductile adjustment price of the conversion of equipment. in the of debentures event a reverse split. stock 1, debenture holders April dated an indenture Under they claimed that were entitled to con- 1960, de Medalists issued subordinated 91,550 vert their debentures into shares common into its bentures convertible price of common at the conversion principal of amount stock in per share, irrespective of outstanding During #370,000.00. 1967, $2.84 e split. reverse stock denied Medalists in the existed convertibl debentures claim and maintained that the conver- $260,000.00 principal amount of price 22,887 sion should shares of they by two small business were owned per common stock at a companies $11.36 and an individual. investment share. through 30, April, June From period negotia- There followed a common stock authorized litigation, tions and threats of after equaled four million shares Medalists which a settlement was reached on or per par share. a value of one dollar with September 18, about 1967. The terms of outstanding 1,729,000 There were shares provided the settlement that Medalists date, that Med- 1967. On June purchase would from the debentures Articles amended its alists’ shareholders $457,740.00plus holders for interest. Incorporation a reverse to effect split whereby Although com- the authorized this settlement was consum- mil- September reduced from four mon stock mated on was or about shares, originally rejected by million with it lion shares one was the deben- per par value resultant increase ture In order holders. to induce the de- After the share from benture holders $4.00. to enter into the settle- 432,250 split, ment, taxpayer there were verse stock offered to sell and stock out- September of Medalists common did sell shares to them on standing. proxy dis- A statement was 2250 shares of his common stock for $4.- per shareholders 20 by share.2 tributed At the time of sale taxpayer, the notice of June the stock in the O-T- meeting, the con- reference to per and with C market had a value of $16.625 debentures, vertible stated: share. part inducement, a Mr. Harmon

2. As a of his 1250 shares of his common stock in Medal- Jongebloed, a director and substantial ists to the J. debenture holders for $4.20 corporation who is stock holder share. agreed litigation, sell in this involved taxpayer’s purpose Although motive in the District Court acceding otherwise, government to this transaction con was also ad- held now purposes duced in the District At Court. that for tax salaried cedes engaged transaction, corporate time of a trade separate company’s aware that and distinct from board of business corporation, directors was dissatisfied the business of with his role rendering compensation. it situation believed services negligence Noland had caused the problem. 1959); Johnson, settled, dispute Unless the Folker resig- (2d understood 908-909 that his Thus, nation de would 162 will authorize a He also demanded. thought corporate employee resulting for ex publicity adversely “ordinary penditures and nec rep- which are affect his business essary” jeopardize to the of his em utation and continuation his future aas *4 corporate ployment. regard, In the court in Moreover, executive. this since the Noland remarked: had a stock interest $630,000, Medalists at valued if the de- every person who works . . “. . prevailed dispute, benture holders in the engaged compensation for is the value of his interest in Medalists pay, earning and that his business substantially would be It diluted. expense to the con- which is essential dispute also shown that this inter- employment is deducti- of his tinuance fering company’s acqui- with the active corpora- of a . The ble .. business program, sition publicity and that the however, tion, of its offi- not that is attending dispute might the the reduce employees cers, holders. or public’s confidence in company, the all Though the holder— individual stock might adversely of which the affect val- executive, may mind, iden- his own company’s including ue of stock, the the tify interests and business with his taxpayer’s interest therein. they legally corporation, of the those distinct, and, ordinarily, if he vol- Upon are facts, these filed his corpo- untarily pays guarantees the refund,- or asserting claim for may obligations, expense ration’s entitled to deduct the full amount of the personal on his not deducted be difference between the fair market value v. Noland Com- turn. [Citations]” of the common stock and the at (4th missioner, 108, 111 Cir. 269 which he sold the shares to the deben- September ture holders 1967. authorized, The taxpay- is deduction the corporate Thus, executive or where a maintains, er either discharge as a ex- business employee the re- undertakes pense pursuant 162,3 to Section or as an corporation, sponsibility he is not of the expense incurred for the or maintenance incurring expenditure of his trade or property conservation of for held the meaning of within the Section business production pursuant in income duPont, Sec- also, Deputy 308 162. See v. 4 tion 212 of the Internal Revenue Code. L.Ed. 416 84 60 U.S. S.Ct. stated, As District the Court denied the rationale, (1940). Following a similar taxpayer’s ap- claim refund and this recognized where a cor- it has been peal followed. pays of his em- porate the debts pertinent part, 3. In Section Inter- individual, 162 of the there shall be case of an “In the provides: nal Revenue ordinary Code all a deduction allowed “(a) during In allowed General. —There shall necessary expenses paid be incurred or ordinary all neces- deduction year— taxable sary paid during expenses incurred . . . (1) year carrying taxable on a or busi- trade conservation, management, (2) ness, ...” pro- property held for maintenance pertinent part, income; In 212 Inter- . . . of the provides: nal Revenue Code 222 “necessary” Gilmore,

ployer-corporation, ness. however See States 372 practical standpoint, may from a 83 L.Ed.2d 570 U.S. S.Ct. (1963). expense payments “ordinary” Also, ex liti- are not where is such gation origin corporate related, penditures officer. and character See generated Helvering, the ex- of the claim which Welch v. S. (1933). pense, potential rather than conse- Ct. 78 L.Ed. taxpayer, quence upon of the claim bar, In the the claim case will determine whether taxpayer’s prompted sale deductible under 212. Anchor against Medalists, was a claim Coupling States, Co. United taxpayer’s employer-corporation. cert, 1970); (7th denied, of the debenture holders’ basis 27 L.Ed.2d 806 U.S. against lay corpo claim Refining (1971); also, see Clark Oil obligation under indenture ration’s agreement Corp. States, F.2d 1217 v. United April 1, dated ob agreement ligation under that related corporation, of the the business origin us, In the case before taxpayer, al trade or business concerning of the claim sale though concededly his status taxpayer’s stock threatened was a suit thereby. Although taxpayer, in affected against Medalists’ holders mind, might compelled felt his own have corporation It related to itself. agree participate to ment, in the settlement *5 financing operation Medalists’ and not expenditures were the he incurred taxpayer’s personal dealing. to the Although thereby to his trade attributable potential the to the tax harm meaning business within the of Section payer’s reputation corpo status 162. insignificant, rate executive was not the deductibility expense of an under Sec respect 212 to With Section possible upon tion 212 does not turn taxpayer Code, the Internal Revenue consequences of claim the fortunes his maintains that he sold his stock at taxpayer. reasons, of the we For these protect investment cost5 in his order therefore, may that, hold that 212 not authorize Section does in he capital by taxpayer of the unrealized the loss deduct a deduction of the loss gain expense this as an under Section. gain capital of the unrealized caused qualify under To as a deduction Section sale of to the his stock debenture expenditure satisfy 212, must holders.6 apply requirements to a trade same Since we have concluded that expense 162 under or business expense claimed here claiming not deductible person was except de in trade or busi- under either need not be Section 162 figure ordinary expenses capital at which the 5. The share to be treated as a because, particular loss on sold his facts of that case, they equal essentially his cost basis were a refund holders previous added). capital gain.” (emphasis stock. holding The distinction between our Judge expressed Contrary my in the view instant case and dissent in Anderson 6. opinion, basically dissenting Cummings’ I do not con- that Anderson involved what was quite clearly taxpayer’s personal ruling in- to be in instant case lia- sider our tax my expressed position e., bility, payment i. consistent with the of “what otherwise might ordinary expense.” dissenting opinion v. Commis- in Anderson The instant (7th payment 1304, sioner, case involves 480 F.2d correctly employer’s Cummings obligation Judge “An- observes indenture As under agreement. It ren- rule of Arrowsmith is this distinction which derson held that inapplicable. Commissioner, ders Sections 162 and 212 344 U.S. might required otherwise what L.Ed. Code, judg- Revenue Internal is affirmed.7 of the district court ment al., Ethelyn et HAMILTON Wheeler of Estate of Harold L. Co-Executors Affirmed. Plaintiffs-Appel- Deceased, Hamilton, lants, Judge (dissent- CUMMINGS, Circuit ing)- CORPORATION, MOTORS GENERAL ordinary expense The incurred Defendant-Appellee. necessary stated the reasons No. 72-1960. dissenting Judge opinion Campbell’s Appeals, States Court “The tax- Anderson v. Commissioner: payer’s payment Seventh Circuit. * * * made to Argued Oct. preserve employment and to avoid reputation injury to his business Dec. Decided ” * ** majority did in Anderson disagree the dissent on this not point; Anderson held that

instead

rule of Arrowsmith v. 97 L.Ed. S.Ct. might

quired ordi- what otherwise be capital

nary expenses to be treated as a particular because, facts of

loss they case, essentially refund were gain. previous capital

of a of a

incurred here is not nature

refund, in- and Arrowsmith is therefore

applicable. argues that no

The Government also *6 the stock incurred because taxpay- price equal to the at a sold entitled to

er’s basis. The on the fair market value

deduction based transferred, property he must but gain long-term capital recognize the

also property. implicit disposition Corp., Shoe

United States General 1960), certiorari

282 F.2d 9 801, L.

denied, 365 U.S. Freighting 808; International Ed.2d Corp.,

Inc. v. (2d the Govern- Since cap- counterclaimed for the

ment has not gains tax, that issue is not before

ital Accordingly, de- I allow the

us.

duction as claimed. government words, maintains government brief, other has In its gain an “ex- “paid is not argued an unrealized the loss of here has not per pense” 162 or Section any expense within Section since the or incurred” appeal disposed figure have we his stock Since share he sold as to grounds, views intimate no precisely equal we other the debenture holders In this issue. basis in the stock. share cost