Gilmore V. Us Case Brief

Citation: Gilmore v. United States, 372 U.S. 39, 83 S. Ct. 623; 9 L. Ed. 2d 570; 63-1 U.S. Tax Cas. (CCH) P9285; 11 A.F.T.R.2d (RIA) 758; 1963-1 C.B. 356

History: S.Ct. for gov’t, CtCls for taxpayer

Justice: Harland

Facts: Don Gilmore attempted to deduct legal expenses incurred in divorce proceedings. Gilmore affirmed the expenses were attributable to his wife’s claims to certain business assets which she asserted to be community property. The disputed property consisted of controlling stock interests in three corporations, each of which was a General Motors automobile dealership. The taxpayer’s gross income was derived almost entirely from his salary as president of the three corporations. The divorce case was a victory for the taxpayer as the wife’s claims of community property were denied entirely and she was denied alimony. Gilmore claimed that had he not succeeded in defeating these claims, he could have lost his stock, corporate positions, and the dealership franchises from which nearly all of his income was derived. The total legal expenses in question amounted to $40,611.36 in 1953 and 1954, which he attempted to claim as a deductible expense.

Issue: Can a taxpayer deduct legal expenses incurred in divorce proceedings if the expenses in question are incurred for the conservation of property held for the production of income?

Holding: No, the taxpayer cannot deduct the legal expenses incurred as they are of personal origin and not business related.

Reasoning: The general rule is that attorneys’ fees paid in connection with a divorce are not deductible. Gilmore claimed the legal expenses incurred were deductible under Section 23(a)(2) which allots deductions from gross income as “ordinary and necessary expenses incurred for the conservation of property held for the production of income.” The wife’s claims stemmed entirely from the marital relationship and not from income-producing activity. The basic test includes the origin and character of the expense...