Reginald G. Hearn and Mary L. Hearn, Husband and Wife v. Commissioner of Internal Revenue

309 F.2d 431 62-2 USTC P 9801 Reginald G. HEARN and Mary L. Hearn, Husband and Wife, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. No. 17620. United States Court of Appeals Ninth Circuit. Oct. 31, 1962. Reginald G. Hearn, San Francisco, Cal., for petitioners. Louis F. Oberdorfer, Asst. Atty. Gen., C. Moxley Featherstone, Lee A. Jackson, Gilbert E. Andrews and Earl J. Silbert, Attys., Dept. of Justice, Washington, D.C., for respondent. 1 Before CHAMBERS and HAMLEY, Circuit Judges, and BOWEN, District Judge. 2 BOWEN, District Judge. 3 Income tax deficiencies for the years 1954, 1955 and 1956 were assessed by respondent Commissioner against petitioners Hearn and his wife, those assessments were at petitioners' request redetermined by the Tax Court, and now the petitioners husband, an active practicing attorney and member of the San Francisco Bar, and his wife, asserting erroneous disallowances of certain business expenses claimed as income deductions, timely ask this Court to review the action of the Tax Court. 1 This Court has jurisdiction. 26 U.S.C. 7482. 4 The principal question raised here is whether the claimed deductions were 'ordinary and necessary business…

Income- tax deficiencies for the years 1954, 1955 and 1956 were assessed by respondent Commissioner against petitioners Hearn and his wife, those assessments were at petitioners’ request redetermined by the Tax Court, and now the petitioners husband, an active practicing attorney and member of the San Francisco Bar, and his wife, asserting erroneous disal-lowances of certain business expenses claimed as income deductions, timely ask this Court to review the action of the Tax Court. 1 This Court has jurisdiction. 26 U.S.C. § 7482 .

The principal question raised here is whether the claimed deductions were “ordinary and necessary business expenses” within the meaning of 26 U.S.C. § 162 (a), and that question is one of fact.

Acting upon a stipulation of the parties, the Commissioner in his redetermi-nation of such deficiencies allowed and *432 the Tax Court approved part of various club, restaurant, hotel, auto, boat, office and business expenses as income tax deductions, as to which neither side raises any question, and to which the following statements are not to be applied.

Petitioner’s expenses claimed by him deductible as ordinary and necessary business expenses fall into two…

(concurring).

While the foregoing opinion is adequate, it does not disclose that the amounts attempted to be deducted are great. Our decision, if it stands, means that Lawyer Hearn may have to spend the next five or ten years working off the deficiency with tax-paid dollars. I have a great deal of sympathy for him in his predicament. But representing himself, he, as most lawyers do when they represent themselves, has refused to recognize the weakness of his case. He contends, as I read the record, that the entertainment items were really distasteful to him, but that entertain extravagantly he must to make an adequate living professionally *434 in San Francisco. But it was open to the tax court to listen to his testimony and conclude that he really enjoyed, per se, his social activities. I do not say he enjoyed them, but it was a permissible inference for a trier of fact.

Also, while the commissioner makes no point of it, there well may be a question in the next similar case (where the taxpayer has his deductions well documented) as to the legality of such large deductions at all for a lawyer for “business getting.” I am sure many deduct therefor in a modest way, but I wonder…