*1258 Legal expenses incurred by taxpayer, the heir of a large estate, in prosecuting litigation whereby a large sum was recovered by the estate and petitioner's distributive share of the estate correspondingly increased, held, not to represent an expense incurred by the taxpayer in carrying on business and consequently not deductible under section 23(a) of the Revenue Act of 1928.
*742 This proceeding seeks redetermination of a deficiency in income tax of $3,857.66 determined for the calendar year 1928. The only error assigned is upon the action of respondent in disallowing a deduction taken by petitioner from gross income of certain attorneys' fees paid by her in the sum of $14,936.22.
FINDINGS OF FACT.
The petitioner is one of nine children, heirs at law of Mary T. Hill, formerly of St. Paul, Minnesota, who died intestate November 22, 1921. An administrator of the estate of Mary T. Hill was appointed on May 16 1922, who filed an estate tax return and paid the estate tax computed thereon in the sum of $2,011,060.96. Thereafter*1259 the respondent determined a deficiency in estate tax in the sum of $1,130,616.08, substantially all of which resulted from his inclusion in the estate of certain trusts created by decedent by deed for the benefit of her children, grandchildren and other relatives. In determining the said deficiency respondent held that such trusts were made in contemplation of death.
The administrator of the estate of Mary T. Hill paid, under protest, the aforesaid deficiency in estate taxes asserted and brought suit in the United States District Court against the collector of internal revenue to recover same and also the estate tax originally paid by him, contending that no tax was due from the estate. Upon trial of this action the District Court found that the several transfers in trust on account of which the deficiency tax of $1,130,616.08 had been assessed were made in contemplation of death, and sustained respondent in his inclusion of these trusts in decedent's taxable estate.
Thereafter on May 17, 1927, the administrator of the estate of Mary T. Hill advised the several heirs of the estate, including petitioner, that he did not intend to appeal from the decision of the United States*1260 District Court in the proceeding brought by him to recover the estate taxes paid and if any of the heirs desired to have the decision reviewed by the United States Circuit Court of Appeals*743 it would be necessary for them to have the record for appeal made and certified and bear the cost of further prosecution.
Upon receipt of this advice petitioner joined with six other heirs of Mary T. Hill in employing a law firm to prosecute an appeal from the decision of the United States District Court to the United States Circuit Court of Appeals and joined with these heirs in an agreement to indemnify and hold harmless the administrator against all legal and other expenses incident to said appeal.
Upon the appeal of this proceeding the United States Circuit Court of Appeals reversed the District Court, and as a result there was recovered from the United States by the estate in 1928 the sum of $1,221,968.35, made up as follows:
| Principal | $1,065,196.74 |
| Interest | 155,262.76 |
| Costs | 1,508.85 |
As a result of the appeal of the case hereinbefore referred to petitioner received as her share of the estate of Mary T. Hill her propertionate part of approximately $1,221,968.35*1261 in excess of the amount which she would have received from the estate if this appeal had not been prosecuted. No part of this excess was reported in her income tax return. The administrator of the estate of Mary T. Hill reported in his income tax return filed for the estate for the year 1928 the interest in the amount of $155,262.76 recovered from the United States. The administrator did not deduct any amount representing attorneys' fees and expenses aggregating $104,553.62 paid by the heirs for the prosecution of the appeal hereinbefore referred to.
The petitioner paid the attorneys prosecuting the aforesaid appeal one-seventh of the aggregate amount of their fees and expenses, or a total of $14,936.22, as her proportion of their legal charges and expenses in procuring a reversal of the decision of the District Court. The payments made by petitioner to these attorneys were in amounts and upon dates as follows:
| July 5, 1927 | $1,428.57 |
| February 14, 1928 | 275.78 |
| November 3, 1928 | 13,231.87 |
| Total | 14,936.22 |
The total amount of the attorney's fees paid by petitioner in the sum of $14,936.22 was deducted in making her income-tax return for the calendar year 1928, *1262 and this deduction was disallowed by respondent in determining the deficiency herein appealed from.
Petitioner is a woman of large means, represented principally by stocks and bonds, which are in the possession of the Bankers Trust Company of New York under a special safe-keeping agreement. Dividends and interest payments accruing to petitioner are collected *744 by the trust company and credited to petitioner's account. The trust company has no authority to make any changes in petitioner's investments except on order, but may be directed to purchase or sell for petitioner's account, to receive purchases made from others, or to deliver securities sold to others, charging or crediting the petitioner's account as the case may be. The petitioner makes many and varied investments, many of which she personally supervises. Purchases and sales of securities for petitioner's account for the years 1927 to 1930, inclusive, were as follows:
| Year | Purchases | Sales |
| 1927 | $825,593 | $493,859 |
| 1928 | 415,449 | 73,065 |
| 1929 | 1,324,114 | 795,922 |
| 1930 | 663,857 | 460,029 |
| Total | 3,229,013 | 1,822,875 |
| Combined total | 5,051,888 |
OPINION.
LEECH: Section 23(a) of the Revenue*1263 Act of 1928 permits the deduction in computing net income of "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business * * *." Petitioner contends that the payments made by her to attorneys under the circumstances set out in our findings represent business expenses incurred in the administration of the estate of her mother, Mary T. Hill. It is her contention that she was engaged in the business of the administration of that estate, due to the refusal of the regular administrator to act in prosecuting an appeal from the judgment rendered against him by the District Court. The authorities cited in support of this contention are decisions holding expenses of the administrator in defending or prosecuting suits against or on behalf of the estate are business expenses deductible by him from gross income of the estate.
Here we have a different situation. The expense insurred under the facts set out in the findings, if paid by the administrator, would have been clearly deductible by him from income of the estate. However, this expense is not a payment by the estate incident to the carrying on of the business of administration, *1264 but one by petitioner as an heir at law of the decedent in protecting her interest as a beneficiary of the estate. We can not agree with petitioner's contention that in employing counsel and prosecuting the appeal she was merely carrying on the business of administration of the estate, and, even if such conclusion could be reached it would not sustain a personal deduction by petitioner in her individual capacity of expenses incurred for the estate.
As an alternative theory petitioner contends that the expenditures in question were ordinary and necessary expenses incurred by her in *745 carrying on her individual business. In support of this she has shown that she is a woman of means, manages her property and makes many sales and purchases of securities.
It may be that expenses incident to the personal activities of petitioner in handling her estate and producing income therefrom represent deductible business expenses, but as to the expense here in question we can not see any connection with such business. The inheritance of property is assuredly not an incident of her purported business. This expense was merely the cost to petitioner of securing her portion of such*1265 inheritance. In , we said: "Legal expenses incurred in breaking a will by which a taxpayer comes into possession of his inheritance are not expenses incurred in carrying on a trade or business."
In , cited as authority by petitioner, we had a question clearly distinguishable from the here presented. There, we allowed the deduction, by a woman engaged in business, of expenses incurred by her in litigation in respect to taxes claimed as due upon the income of such business. If petitioner in the present proceeding were engaged in business, the property in respect to which these expenses were incurred was not used therein, and the expense was not connected therewith and did not grow out of such business so as to bring the case within the rule laid down in .
In Alice P. Bachofen von , we denied the deduction of legal expenses incurred by the taxpayer in recovering from the Alien Property Custodian her sequestrated property and a large amount of accumulated income thereon. See also *1266 ; affd., ; ; .
Judgment will be entered for the respondent.