Pennroad Corp. v. Commissioner
United States Tax Court
1. Where petitioner received $ 15,000,000 in settlement of two derivative stockholders' suits against The Pennsylvania Railroad Company charging breach of a fiduciary relationship in causing improper investment of petitioner's funds, the entire amount received resulted in no income taxable to petitioner. 2. Legal fees and expenses incurred in connection with litigation and settlement of claims resulting in recovery of capital held not deductible as ordinary and necessary…
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1. Where petitioner received $ 15,000,000 in settlement of two derivative stockholders' suits against The Pennsylvania Railroad Company charging breach of a fiduciary relationship in causing improper investment of petitioner's funds, the entire amount received resulted in no income taxable to petitioner. 2. Legal fees and expenses incurred in connection with litigation and settlement of claims resulting in recovery of capital held not deductible as ordinary and necessary business expenses.
1Opinion of the Court
OPINION.
Aetjndell, Judge;
The principal issue herein involves the tax treatment of $15,000,000 received by petitioner from Pennsylvania in settlement of two derivative stockholders’ suits alleging, in substance, that through Pennsylvania’s domination and control of petitioner it had caused petitioner to make certain investments with the primary intention of benefiting Pennsylvania rather than petitioner, and to pay excessive prices for the securities acquired. It was charged that Pennsylvania, by reason of the interlocking directorate and the voting trust arrangement, and in light of the…
2Cases cited8 opinions
- Lucas v. American Code Co.Supreme Court of the United States · 1930
- Doyle v. Mitchell Brothers Co.Supreme Court of the United States · 1918
- Helvering v. StormfeltzCourt of Appeals for the Eighth Circuit · 1944
- Overfield v. Pennroad CorporationDistrict Court, E.D. Pennsylvania · 1941
- Vincent v. CommissionerUnited States Tax Court · 1952
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3Cited by2 opinions
- California and Hawaiian Sugar Refining Corporation, Limited v. The United StatesUnited States Court of Claims · 1962
- Pennroad Corp. v. CommissionerUnited States Tax Court · 1954