tax accounting 2 495439

U.S. Supreme Court HIGGINS v. COMMISSIONER OF INTERNAL REVENUE, 312 U.S. 212 (1941) 312 U.S. 212 HIGGINS v. COMMISSIONER OF INTERNAL REVENUE. No. 253. Argued Jan. 10-13, 1941. Decided Feb. 3, 1941. Rehearing Denied Mar. 3, 1941 See 312 U.S. 714 , 61 S.Ct. 728, 85 L.Ed. –. [312 U.S. 212, 213] Mr. Selden Bacon, of New York City, for petitioner. Mr. Arnold Raum, of Washington, D.C., for respondent. Mr. Justice REED delivered the opinion of the Court. Petitioner, the taxpayer, with extensive investments in real estate, bonds and stocks, devoted a considerable portion of his time to the oversight of his interests and hired others to assist him in offices rented for that purpose. For the tax years in question, 1932 and 1933, he claimed the salaries and expenses incident to looking after his properties were deductible under Section 23(a) of [312 U.S. 212, 214] the Revenue Act of 1932.1 The Commissioner refused the deductions. The applicable phrases are: ‘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 ….’ There is no dispute over whether the claimed deductions are ordinary and necessary expenses. As the Commissioner also conceded before the Board of Tax Appeals that the real estate activities of the petitioner in renting buildings2 constituted a business, the Board allowed such portions of the claimed deductions as were fairly allocable to the handling of the real estate. The same offices and staffs handled both real estate and security matters. After this adjustment there remained for the year 1932 over twenty and for the year 1933 over sixteen thousand dollars expended for managing the stocks and bonds. Petitioner’s financial affairs were conducted through his New York office pursuant to his personal detailed instructions. His residence was in Paris, France, where he had a second office. By cable, telephone and mail,…