L. T. Zoby, Sr., and Virginia M. Zoby v. United States

ALBERT V. BRYAN, Circuit Judge:

Appellant L. T. Zoby, Sr. 1 failed in his suit for refund of his 1960 Federal income taxes because of the District Court's adverse ruling upon the following question: whether as a contractor reporting on a cash receipts and disbursement basis, Zoby was entitled to deduct “as ordinary and necessary expenses” 2 the amounts expended by his surety in fulfilling his obligations under his contracts.

The taxpayer’s contention was that these sums represented loans to him by the surety, for the repayment of which he is responsible, that the proceeds were applied to the…