United States v. Gilmore

United States v. Gilmore, 372 U.S. 39 (1963), was a federal income tax case before the United States Supreme Court.

Background
In the course of a hotly contested divorce, the taxpayer had incurred substantial legal fees in defending against his wife's claim to ownership of a controlling interest in the family business. Had she succeeded, his principal source of livelihood—his salary as chief executive—might be jeopardized.

Accordingly, he sought to deduct some of these fees for the "conservation ... of property held for the production of income."

Opinion of the Court
Following its earlier decision in Lykes v. United States, the Supreme Court sustained the Commissioner in disallowing the deduction as a "family" expense under § 262. The Court reasoned that the deductibility of legal fees depends upon the origin of the litigated claim rather than upon the potential consequences of success or failure to the taxpayer's income status. Since the origin of the litigation was to be found in the taxpayer's marital difficulties, no deduction was allowable.

From the Syllabus:
 * The Supreme Court, Mr. Justice Harlan, held that origin and character of claim with respect to which expense was incurred, rather than its potential consequences upon fortunes of taxpayer, is controlling basic test of whether expense was ‘business' or ‘personal’ and, hence, whether it is deductible as expense incurred for conservation of property held for production of income.