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March 23, 1964


The opinion of the court was delivered by: HIGGINBOTHAM

Both the plaintiff, Morgan S. Kaufman, and the defendant, United States of America, move for summary judgment *fn1" in this suit for tax refund *fn2" in which plaintiff claims deductions for legal and related expenses incurred by him in the process of obtaining reinstatement to the Bar. The parties agree that there are no factual issues in dispute. *fn3"

Plaintiff practiced law in Pennsylvania from 1905 until 1941, when criminal charges were lodged against him. The indictment was eventually not prossed after two trials where the juries failed to return unanimous verdicts. Thereafter, disbarment proceedings were instituted against plaintiff and in 1943 he was disbarred. In 1941, while the criminal prosecution was still pending, plaintiff purchased a manufacturing plant and began devoting virtually all of his business time to the development of this enterprise. Plaintiff continued in the manufacturing business until 1958 when he sold his interest in the plant.

 During the years 1957, 1958 and 1959, plaintiff incurred $ 25,550.84 of legal and related expenses in an effort to gain reinstatement to the Bar. On March 26, 1959, the United States District Court issued an order reinstating him. In its order, however, the Court stated that even though it was granting 'clemency,' the original disbarment was 'fully justified.' *fn4"

 In order for expenses to be deductible under § 162 of the 1954 Internal Revenue Code, they must relate directly to a business *fn5" that exists or existed *fn6" and not to a prospective venture which is nonexistent at the time to which the deduction pertains. See, McDonald v. Commissioner, 323 U.S. 57, 65 S. Ct. 96, 89 L. Ed. 68 (1944); Owen v. Commissioner, 23 T.C. 377 (1954).

 The government maintains that the legal fees in question relate to plaintiff's then prospective efforts to become a licensed attorney and not to plaintiff's former 'business' of practicing law, the latter having been terminated by the disbarment with plaintiff's full-time participation in an unrelated business for 16 subsequent years. *fn7"

 At the threshold, it must be conceded that neither counsel nor the Court has found any cases involving the precise factual issue now before this Court. Thus, since as Mr. Justice Holmes once said, 'the language of judicial decision is mainly the language of logic,' *fn8" we must inquire as to which set of previously announced principles are most relevant to decide the instant matter as a case of first impression.

 Basically, there have been three lines of cases involving lawyers which announce doctrines that seem most relevant and controlling here:

 (1) Cases involving elected state judges where the issue was whether a judge can deduct as a present business expense those campaign expenditures incurred in an effort to obtain re-election during a subsequent year.

 (2) Cases involving a lawyer's expenditures for his admission to practice in state 'X' where taxpayer is already licensed to practice in state 'Y'.

 (3) Cases where taxpayer-lawyer is not presently practicing in the state where he has been licensed but in which he claims deductions for expenditures made in order to prepare for the resumption of practice in his licensed state at some indefinite future date.


 In McDonald v. Commissioner, supra, the Supreme Court held that a Pennsylvania state judge seeking re-election for the next term was not permitted to deduct direct campaign expenses and party contributions *fn9" since these expenditures related to the future position to which he aspired and not to the present business from which the income flowed. After noting that a judge was in a 'trade or business,' as that term was used in the then applicable Internal Revenue Code, the Court stated:

 'He could, that is, deduct all expenses that related to the discharge of his functions as a judge. But his campaign contributions were not expenses incurred in being a judge but in trying to be a judge for the next ten years. That is as true of the money he spent more immediately for his own reelection as it is of the 'assessment' he paid into the party coffers for the success of his party's ticket.' (323 U.S. at 60, 65 S. Ct. at 97).

 This principle was recently reaffirmed per curiam in a Third Circuit decision containing almost identical facts. Shoyer v. United ...

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