611 F2d 373 Morse Signal Devices, Inc. v. United States of America

611 F.2d 373

79-2 USTC P 9712

M.S.D., Inc.; Morse Signal Devices, Inc., and The Signal
Devices and Alarm Co., Plaintiffs-Appellants
United States of America, Defendant-Appellee.


United States Court of Appeals, Sixth Circuit.

October 30, 1979.

Unpublished Disposition
NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.

Before: WEICK, KEITH and BROWN, Circuit Judges.

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Appellants allege error in the District Court's judgment denying them recovery of income taxes paid for the taxable year 1970 on payments made to the corporate executive's widow pursuant to an agreement made with Appellant corporation several years prior to the executive's death. Appellants contend that such payments constitute an ordinary and necessary business expense under 26 U.S.C. Sec. 162(a) and are therefore deductible from the corporation's gross income under 26 U.S.C. Sec. 404(a)(5).


The District Court found that the payments in issue were not "necessary" business expenses because such payments were not intended to be made in exchange for a business benefit. Rather the payments were intended to insure the financial security of the corporate executive's widow.


Upon consideration of the record, and Appellants' arguments to this Court, we conclude that the District Court applied the proper legal standard in this case, namely, whether the taxpayers had demonstrated that the payments were intended to result in the inurement of a business benefit to the corporation. Allen Industries, Inc. v. Commissioner, 414 F.2d 983 (6th Cir.1969). The judgment of the District Court is hereby AFFIRMED.