Estate of Rockefeller v. Commissioner

Estate of Rockefeller v. Commissioner, 762 F.2d 264 (2d Cir. 1985),[1] was a case in which the United States Court of Appeals for the Second Circuit held that section 162(a) of the Internal Revenue Code only allows deductions against income for expenses that occur while carrying on a trade or business.

Estate of Rockefeller v. Commissioner
Court	United States Court of Appeals for the Second Circuit
Full case name	Estate of Nelson A. Rockefeller, Deceased, Laurance S. Rockefeller, J. Richardson Dilworth and Donal C. O'Brien, Jr., Executors and Margaretta F. Rockefeller v. Commissioner of Internal Revenue
Argued	April 22, 1985
Decided	May 24, 1985
Citation(s)	762 F.2d 264; 56 A.F.T.R.2d 85-5094; 53 USLW 2620; 85-1 USTC (CCH) ¶ 9429
Case history
Prior action(s)	83 T.C. 368 (1984)
Court membership
Judge(s) sitting	Wilfred Feinberg, Henry Friendly, Jon O. Newman
Case opinions
Majority	Friendly, joined by Feinberg, Newman
Laws applied
Internal Revenue Code § 162(a)
Keywords
Business expense

Facts of the case

Nelson Rockefeller had incurred $550,159.78 worth of legal fees and services with regard to his 1974 vice presidential confirmation hearings. Mr. Rockefeller then claimed a $63,275 deduction on his 1974 income tax return, which was the amount of his salary as vice-president.

Determination of the court

The 2nd Circuit affirmed the Tax Courts ruling that the deductions were not allowed under IRC section 162.[2] The Court essentially compared Rockefeller's past job as Governor of New York with his position as Vice President and found that the two positions did not constitute the same trade or business. Mr. Rockefeller's estate argued that his trade or business was that of public service, but there was no authority that supported such a broad interpretation. Thus, the legal and consulting fees were not incurred in carrying out a trade or business, but in anticipation of doing so. Essentially, the court ruled that the expenses could not be deducted because Rockefeller was not yet “carrying on” the business of being Vice President.

References

1. Estate of Rockefeller v. Commissioner, 762 F.2d 264 (2d Cir. 1985).
2. 26 U.S.C. § 162

External links

• Text of Estate of Rockefeller v. Commissioner, 762 F.2d 264 (2d Cir. 1985) is available from:  CourtListener  Justia  OpenJurist  Google Scholar