Unpublished Dispositionm.s.d., Inc.; Morse Signal Devices, Inc., and the Signaldevices and Alarm Co., Plaintiffs-appellants v. United States of America, Defendant-appellee, 611 F.2d 373 (6th Cir. 1979)

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U.S. Court of Appeals for the Sixth Circuit - 611 F.2d 373 (6th Cir. 1979)

October 30, 1979


Before: WEICK, KEITH and BROWN, Circuit Judges.


Appellants allege error in the District Court's judgment denying them recovery of income taxes paid for the taxable year 1970 on payments made to the corporate executive's widow pursuant to an agreement made with Appellant corporation several years prior to the executive's death. Appellants contend that such payments constitute an ordinary and necessary business expense under 26 U.S.C. § 162(a) and are therefore deductible from the corporation's gross income under 26 U.S.C. § 404(a) (5).

The District Court found that the payments in issue were not "necessary" business expenses because such payments were not intended to be made in exchange for a business benefit. Rather the payments were intended to insure the financial security of the corporate executive's widow.

Upon consideration of the record, and Appellants' arguments to this Court, we conclude that the District Court applied the proper legal standard in this case, namely, whether the taxpayers had demonstrated that the payments were intended to result in the inurement of a business benefit to the corporation. Allen Industries, Inc. v. Commissioner, 414 F.2d 983 (6th Cir. 1969). The judgment of the District Court is hereby AFFIRMED.