C.I.R. v. Doering
In C.I.R. v. Doering, (2 Cir., 1964) 335 F.2d 738, taxpayer owned stock in Argosy Pictures Corporation, which had contracted to produce certain films for distribution by republic Pictures Corporation.
A dispute arose between the corporations as to the amount of Argosy's participation in the proceeds under the contract, but Argosy liquidated before a settlement was effected. Because the claim had no ascertainable fair market value at the time, the transaction remained 'open' for tax purposes.
In redemption of his stock, a capital asset, taxpayer received cash and a pro rata portion of Argosy's claim against Republic.
Thereafter, in effecting a settlement of the dispute over the terms of Argosy's contract with Republic, taxpayer incurred legal expenses.
The full Tax Court, four judges dissenting, allowed him to deduct the expenses under section 212 because they were incurred for the 'collection of income.' A divided panel of the Second Circuit affirmed.