Low v. Nunan, 154 F.2d 261 (2d Cir. 1946)

*262 *263 J. Theodore Cross, of Utica, N. Y. (Francis C. Steates, of Utica, N. Y., of counsel), for petitioner.

Samuel O. Clark, Jr., Asst. Atty. Gen. (Sewall Key, A. F. Prescott, and S. Dee Hanson, of Washington, D. C., of counsel), for respondent.

Before L. HAND, CHASE, and FRANK, Circuit Judges.

*264 FRANK, Circuit Judge.

1. Some at least of the expenses, had they been paid or incurred by the corporation, would have been deductible by it as "ordinary" and "necessary" to its business within § 23(a) (1) (A). But we need not decide which of them, in those circumstances, would have had that character, for they were paid or incurred by the Lows. Certainly on the facts here, we cannot say that what was the company's business was also that of Low and his wife; nor do we think that they were engaged in a business which consisted of being the unpaid officers of the corporation. Accordingly, the expenditures were not made by them "in carrying on any trade or business." Cf. Deputy v. Dupont, 308 U.S. 488, 493-494, 60 S. Ct. 363, 84 L. Ed. 416; Interstate Transit Lines v. Commissioner, 319 U.S. 590, 63 S. Ct. 1279, 87 L. Ed. 1607; New Colonial Co. v. Helvering, 292 U.S. 435, 442, 54 S. Ct. 788, 78 L. Ed. 1348. We reach that conclusion on our own. In addition, we have the determination of the Tax Court adverse to the taxpayer. Dobson v. Commissioner, 320 U.S. 489, 64 S. Ct. 239, 88 L. Ed. 248; Commissioner v. Scottish American Co., 323 U.S. 119, 125, 65 S. Ct. 169; Trust of Bingham v. Commissioner, 325 U.S. 365, 65 S. Ct. 1232; Commissioner v. Wilcox, 66 S. Ct. 546.

2. Nor do we think that any of these items come within § 23(a) (2). True, Low and his wife "held for the production of income" their shares in the company; and it is immaterial that, at the time, they yielded no income.^[3] But we think that none of the expenditures was "ordinary."^[4] We believe that § 23(a) (2) must be read in the light of Deputy v. Dupont, supra, although it was decided before the 1942 amendment which added § 23(a) (2).^[5] For there the Court assumed, arguendo,^[6] that "conserving and enhancing" one's "estate" constituted a business within § 23(a), as it then stood, but held that the expenditures there in question, made by a substantial stockholder in a corporation for the corporation's benefit, were not deductible, because they were not "ordinary."^[7] In the case of a stockholder, said the court, there may be deducted as "ordinary" only what can be placed "in the category of those items of expense which * * * a substantial stockholder in a corporation engaged in conserving and enhancing his estate would ordinarily incur"; the Court cited as typically "ordinary" such items as "rental of safe deposit boxes, cost of investment counsel or investment services, salaries of secretaries and the like." Stockholders and especially those who, like the Lows, own considerably less than all of the stock of a corporation when engaged in management, conservation or maintenance of their property in that stock, do not ordinarily incur or pay expenses such as those claimed to be deductible here.

3. Taxpayer complains that the judge at the trial showed such impatience with taxpayer when testifying as to indicate prejudice. But most judges, being human, sometimes disclose impatience when witnesses are unduly repetitious or excessively detailed. Such displays of impatience should usually be restrained in the presence of a jury. But, in the absence of a jury, they are not to be taken as signs of improper bias.^[8] We know that, when on the bench, we sometimes manifest, orally or otherwise, symptoms of boredom, but are nevertheless able to decide in favor of the party whose lawyer has taxed our patience, if his case is meritorious.^[9]

4. We have considered other alleged errors which we regard as not worth discussing.

Affirmed.

[3] Trust of Bingham v. Commissioner, 325 U.S. 365, 65 S. Ct. 1232.

[4] We pass the question whether, in addition, any of them is "directly connected with or proximately results from" the management, conservation, or maintenance of the shares of stock. Cf. Trust of Bingham v. Commissioner, supra, 325 U.S. at pages 373-374, 65 S.Ct. at page 1237. 1942-2 Cum.Bull. 430, 571.

[5] § 121 of the Revenue Act of 1942.

[6] Against the protest of two Justices; see 308 U.S. 488, 499, 60 S. Ct. 363, 84 L. Ed. 416.

[7] We refer to the second point of the opinion, found at 308 U.S. 488, 494-497, 60 S. Ct. 363, 84 L. Ed. 416.

[8] Buckley v. Atlheimer, 2 Cir., 152 F.2d 502, 511. As to the distinction between proper and improper judicial prejudice, see In re J. P. Linahan, 2 Cir., 138 F.2d 650.

[9] We do not mean to say that the lawyers for either side in the instant case bored us.