Arthur H. Du Grenier, Inc. v. Commissioner
United States Tax Court
Petitioner made payment to the estate of a former shareholder in settlement of a cause of action wherein the estate asserted that it received less than fair market value on petitioner's redemption of its stock. Held, through application of the origin-of-the-claim test, as originally stated in United States v. Gilmore, 372 U.S. 39 (1963), the settlement payment is not an ordinary and necessary business expense, but rather, a nondeductible capital expenditure.
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Petitioner made payment to the estate of a former shareholder in settlement of a cause of action wherein the estate asserted that it received less than fair market value on petitioner's redemption of its stock. Held, through application of the origin-of-the-claim test, as originally stated in United States v. Gilmore, 372 U.S. 39 (1963), the settlement payment is not an ordinary and necessary business expense, but rather, a nondeductible capital expenditure. Held, further, the same result is obtained through the application of the principle as stated in Arrowsmith v. Commissioner, 344 U.S. 6…
1Opinion of the Court
Sterrett, Judge:
Respondent determined a deficiency in petitioner’s Federal income tax of $859.25 for the taxable year ended December 31, 1967.
The sole issue presented for adjudication is whether petitioner, Arthur IT. DuGrenier, Inc., is entitled to deduct as an ordinary and necessary business expense under the provisions of section 162,1.R.C. 1954,1 the payment of $190,000 in settlement of a suit instituted by the estate of a former shareholder.2
FINDINGS OF FACT
Some of the facts have been stipulated. The stipulation, together with the exhibits attached thereto, are incorporated herein by…
2Cases cited17 opinions
- North American Oil Consolidated v. BurnetSupreme Court of the United States · 1932
- United States v. GilmoreSupreme Court of the United States · 1963
- Woodward v. CommissionerSupreme Court of the United States · 1970
- Arrowsmith v. CommissionerSupreme Court of the United States · 1952
- United States v. LewisSupreme Court of the United States · 1951
12 more not listed; retrieve them via the Exa API.
3Cited by22 opinions
- Bresler v. CommissionerUnited States Tax Court · 1975
- Stoody v. CommissionerUnited States Tax Court · 1976
- Redwood Empire Savings & Loan Association v. Commissioner of Internal RevenueCourt of Appeals for the Ninth Circuit · 1980
- Berry Petroleum Co. v. CommissionerUnited States Tax Court · 1995
- Eisler v. CommissionerUnited States Tax Court · 1973
17 more not listed; retrieve them via the Exa API.