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23(a)(1)(A) of the 1939 Code, in arriving at AGI.3 In Standing,
the taxpayer was the sole proprietor of two businesses. The
Commissioner audited the taxpayer's 1945 through 1949 individual
income tax returns, and the taxpayer retained an attorney and an
accountant to assist him in the audit. The taxpayer and the
Commissioner settled the matter; substantially all of the
agreed-upon deficiencies were proximately related to the
taxpayer's businesses. The taxpayer later claimed a business
deduction for the deficiency interest and the professional fees
incurred with respect to the deficiencies. The Commissioner
disallowed these expenses as business deductions from gross
income mainly because the expenses had no connection with the
taxpayer's business. We disagreed. We held that the interest
and the fees were "ordinary and necessary expenses paid or
incurred during the taxable year in carrying on * * * [the
taxpayer's] trade or business" within the meaning of section
23(a)(1)(A) of the 1939 Code. Standing v. Commissioner, supra at
793. The Court of Appeals for the Fourth Circuit affirmed our
decision allowing these deductions. Commissioner v. Standing,
259 F.2d at 456.
3 Sec. 22(n)(1) of the 1939 Code provides that AGI equals
gross income less "deductions allowed by section 23 which are
attributable to a trade or business carried on by the taxpayer,
if such trade or business does not consist of the performance of
services by the taxpayer as an employee". Sec. 23(a)(1) of the
1939 Code allows for the deduction of "All the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business". The language of secs.
22(n)(1) and 23(a)(1) is essentially verbatim with the language
of secs. 62(a)(1) and 162(a), respectively.
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