Estate of Meade v. Commissioner

AINSWORTH, Circuit Judge:

Taxpayers1 incurred legal expenses in connection with the settlement of a civil antitrust claim that had been assigned to them in pro rata shares as distribu-tees in a corporate liquidation. These cases present the question whether the legal expenses are deductible from ordinary income under section 212 of the Internal Revenue Code of 1954, or whether, under section 263 of the Code, they must be capitalized and offset against long-term capital gain realized by taxpayers from the settlement.

The pertinent facts have been fully stipulated. Joseph M. Meade and William S.…