Heller

On order of this court, the proceedings on the petition of Walter S. Heller, taxpayer, and the petition of the Commissioner of Internal Revenue for review of the decision of the Tax Court are consolidated.

The question raised by the petition of the Commissioner of Internal Revenue is whether attorney’s fees paid by the taxpayer in connection with litigation for the cash value of shares of stock were allowable as a deduction from gross income. The Tax Court found they were.

The Commissioner contends these fees were incurred in a matter pertaining to assets of a purely capital nature and were therefore a capital expenditure and not deductible.

The facts are stipulated. During the year 1937, a merger of Associated Oil Company into the Tidewater Oil Company was tinder way. The taxpayer and several other stockholders refused to accept Tidewater stock in exchange for their stock in Associated Oil. Pursuant to the provisions of Section 369 of the California Civil Code, suit was commenced for the cash value of Associated Oil stock. The attorney’s fees in question were incurred in the prosecution of this litigation. The amount of $2,145 was deducted as attorney’s fees in the 1937 tax…