¶1dissenting: The majority opinion bases its conclusion largely upon the proposition that the attorneys’ fees incurred to contest the seizure and forfeiture by the Alien Property Custodian of claimant’s property (the claimant asserting that the property was unjustly detained by such Custodian) represented cost of defense of title. To my mind, that approach, in effect, merely assumes the answer. I think the problem is one of practical application of the tax laws in an unusual setting, hut one well removed from the ordinary concept of defense of title.
¶2The Trading With the Enemy Act was not an uncommon war measure. It authorized the Attorney General to issue vesting orders, seizing the property of persons who were inter alia German nationals, where the national interest of the United States required the seizure of the property of such persons. No doubt the great majority of such seizures were proper, but it was obviously anticipated that in many instances ultimate decision might determine that all or part of the property seized be returned. The person whose property was seized was, therefore, given the right and opportunity within the period prescribed in the Act to seek the return of the property seized. There was a provision for a time limit for making such claim, and, of course, the burden of proof was placed upon the claimant. The purpose of such provisions was to relieve the Government from the necessity of establishing the right to the seizure in many cases in which no claim would be filed and, where timely claim was filed, to put. the onus upon the claimant, who would presumably have ready access to the facts and circumstances upon which he relied.
¶3Pending the outcome on the merits, it was, of course, necessary to provide that some agency (in this instance, the Alien Property Custodian) sequester, conserve, control, and administer the property seized. It is clear, however, that the interest of the person whose property was seized did not terminate with the seizure. His right to substantiate his position was preserved unless and until either the time for filing claim had passed or, if claim was timely filed, final adverse decision on the merits.
¶4To my mind, in prosecuting his claim, the person whose property was seized was not in any realistic sense defending title under circumstances usually present in the “defense of title” type of case. In the instant case, no issue is raised as to whether title was in claimant at the time of seizure. The rights of the claimant revolved around the question of whether or not she was an enemy national under the Act. In the interim, of course, it was necessary that the Alien Property Custodian have appropriate duty, power, and authority to deal with the property seized, without which provision there would have been either chaos or an absolute seizure without the saving opportunity of demonstrating ultimately that the seizure was in error.
¶5Under the facts indicated above, I do not think the decisive factor may be permitted to rest upon the generalized use of the words “defense of title to property” because, to my mind, the use of the quoted words is not appropriate to the circumstances. It seems to me that the claimant was merely pursuing her statutory right to prevent (if she could prove her case) the ultimate confiscation of her property, and that her action in so doing was one of conservation of her basic interest in the property within the meaning of section 23 (a) (2),
¶6I agree with the majority statement that “the enactment' of section 23 (a) (2) was not intended to change the firmly established distinction between current expenses and capital outlay.” The general recognition of this distinction, however, does not dispose of the problem of category. The majority opinion rests its view that the expenditure was a capital outlay (except as to the allocation of a ratable share to the income factor) substantially on the theory that the expenditures were in defense of title as above indicated. Again it is my view that this approach is neither practical nor realistic. No doubt the result as projected by the majority view would be a pro rata application of the attorneys’ fees (to the extent determined to be capital) to increase fro tanto the basis of each item of the property ultimately returned to the petitioner. I do not find any support for this view where attorneys’ fees are paid to prosecute a claim in order to prevent ultimate confiscation of property where no issue as to petitioner’s title at the time of the original seizure is raised. I would view the case otherwise, of course, if the circumstances brought the case in fact within the “defense of title” rule. If a catch phrase is necessary, however, to project the problem before us in the instant case, I would use the words “preservation and protection of interests in property.” It may be added that the words “preservation” and “protection” are encompassed within the meaning of the word “conservation.” See Webster’s New International Dictionary (2d ed.) p. 568, which defines conservation as a “conserving, preserving, guarding, or protecting, a keeping in a safe or entire state; preservation.”
¶7The mere fact that the property in question consisted of capital assets does not require the conclusion that expenditures for its preservation or protection must be capitalized. Such a view would, in my opinion, be in conflict with James H. Knox Trust, 4 T. C. 258 (1944), in which commissions paid to testamentary trustees out of the corpora of testamentary trusts based on a percentage of receipts and disbursements of trust assets (in accordance with local law) were held deductible from gross income of the trusts under section 23 (a) (2) of the Code. In that case, although respondent argued that, the payments were in effect a charge upon the properties and as such constituted a capital expenditure, and although the payments were actually made out of corpus, we held them to be deductible as expenses “for the management, conservation, or maintenance of property held for the production of income” within the meaning of section 23 (a) (2)..
¶8I realize that the distinction between capital expenditures and current expenses may not always be drawn with precision. Nevertheless, a classification of the payment of the legal fees actually in issue, in one category or the other, is essential to the decision in the instant case. In my judgment, the attorneys’ fees paid for legal services in the single matter of the prosecution and settlement of the claim to the return of the seized property, partake of the essence of ordinary and necessary current expenses for specific acts looking to the immediate conservation of an interest in property rather than of capital expenditures to be allocated in some manner to basis. The only suggested supporting principle to the contrary is the “defense of title” principle which, to my mind, for the reasons already explained, is not here applicable.
¶9In addition to the foregoing expression of my own views, I concur in the dissenting opinion of Judge Forrester.