19. Mr. Fisher resisted Mrs. Fisher's demands for such a large gross settlement because it would require the sale of a considerable part of his Fisher Scientific Company stock which would have resulted in the loss of a large part of his annual income producing property and possibly his income producing position with the company.
20. Mrs. Fisher rejected a proposed financial arrangement which included a trust of Fisher Scientific Company stock on the ground that Mr. Fisher and his family might cause the dividends paid on that stock to be reduced.
21. To influence Mr. Fisher to make a large financial settlement, Mrs. Fisher through her attorney threatened disclosures that would reflect discredit upon Mr. Fisher and bring disgrace on him and members of his family; refused to let him visit the children, and entered suit in the County Court of Allegheny County for support even though she was then receiving substantial monthly support under an interim arrangement.
22. On Thanksgiving morning, following the entry of the suit in County Court for support, the newspapers published a story to the effect that Mr. Fisher had left the family residence and had deprived his wife and children to the extent that it was necessary to file suit for adequate support. As a result of that publicity, friends of Mr. Fisher later informed his attorney that the conduct of Mrs. Fisher would bear investigation.
23. In the investigation that followed, sufficient evidence was obtained about Mrs. Fisher's personal conduct, as a result of which, Mr. Fisher's attorney on December 14, 1953, on instructions from Mr. Fisher, withdrew all offers of support and issued an ultimatum to Mrs. Fisher to accept $ 5,000 in cash, counsel fees and the continuation of the existing arrangement of $ 600 a month for the children and file suit for absolute divorce, or Mr. Fisher would file suit for an absolute divorce, charging adultery and naming the corespondent.
24. That same day Mrs. Fisher agreed to enter suit for divorce and refused to accept even the $ 5,000.
25. Mr. Fisher did not file an answer to the divorce or contest it and a divorce was granted to Mrs. Fisher on March 5, 1954. An agreement was entered into on February 19, 1954, between Mr. and Mrs. Fisher for $ 200 per month support for each of the children, visitation privileges for Mr. Fisher and a division of the personal property.
26. Mr. Rock rendered Mr. Fisher separate bills for his services charging $ 2,500 for his services in connection with the divorce and $ 8,000 for his services from October 21, 1953, to November 14, 1953, in negotiating a financial settlement. The deductibility of the payment of $ 8,000 is the item in dispute.
Conclusions of Law
1. The services, for which the attorneys' fee in controversy was paid, were not to prevent the payment of the liability due Mrs. Fisher, but to adjust the method of satisfying that liability in a manner which would not unnecessarily reduce plaintiff's income from property which he owned, and hence it was for the purpose of conserving and maintaining this income-producing property.
2. The controversy between the spouses from October 21, 1953, to December 14, 1953, did not involve the question of liability but to the manner in which it might be met, the wife having demanded a part of the husband's income-producing property, control over which affected the husband's general income-producing capacity, and the legal fees incurred by the husband are, therefore, deductible under Section 212(2) of the Internal Revenue Code of 1954.
3. The fact that the same attorneys acted for plaintiff in connection with his domestic controversy, even though it resulted in the elimination of substantially all liability, does not convert the services rendered by them prior thereto, in the matter of the negotiation of an agreement by which the liability to Mrs. Fisher for property would be so adjusted as to conserve and protect plaintiff's specific holdings in Fisher Scientific Company, to personal living or family expense of plaintiff.
4. The expenditure of the attorneys' fees had a proximate and direct relation to the conservation and maintenance of specific property, the ownership of which enabled plaintiff to receive income and is deductible under Section 212(2) of the Internal Revenue Code of 1954.
An appropriate order may be submitted.
© 1992-2004 VersusLaw Inc.