Surasky v. United States
325 F.2d 191 (5th Cir. 1963)
- Surasky was a shareholder in
Montgomery Ward. He attempted to get a new Board of Trustees elected.
This involved a 'proxy campaign' to convince the other shareholders to
vote for Surasky's candidates.
- That campaign cost Surasky
- When he filed his taxes,
Surasky claimed a $17k deduction as an expense related to the production
- 26 U.S.C. §212 allows for deductions related to the
production and collection of income.
- The IRS denied the deduction.
- The Trial Court found for the
IRS. Surasky appealed.
- The Trial Court found that
there wasn't a strong connection between the proxy campaign and
production of income for Surasky. Therefore, the expenses were not
- There was no guarantee that
the new Board would actually make the price of Surasky's stock rise.
- The Appellate Court reversed
and allowed the deduction.
- The Appellate Court found
that even if the gain was speculative, the expenses were still deductible
- The Court noted that
nothing in §212 required a
proximate relationship between the expenses and the potential production
- This decision was a bit of a
departure from the language implied in Welch v. Helvering (290 U.S. 111 (1933)), which implied that
there was some objective standard to what was ordinary and necessary.