*3072 The attorneys' fees and expenses incurred by the petitioner in defending indictments charging conspiracy in restraint of trade held not deductible as an ordinary and necessary business expense.
*1289 This is a proceeding for the redetermination of a deficiency in income and profits taxes for the calendar year 1921 in the amount of $3,781.71. The deficiency results from the action of the respondent in disallowing deductions claimed by the petitioner an account *1290 of expenses incurred in defending criminal prosecutions instituted against it.
FINDINGS OF FACT.
The petitioner is a corporation organized in February, 1907, under the laws of the State of New York and during the taxable year 1921 was engaged in the business of manufacturing and selling architectural terra cotta.
The petitioner kept its books on the accrual basis and during the taxable year 1921 accrued thereon the sum of $37,318.64 for attorney's fees and expenses incurred during that year in the defense of two indictments for alleged violations of the Sherman Act.
*3073 The petitioner recognized its liability for the said attorney's fees and expenses and there was no dispute as to the amount thereof Of the total amount accrued on the books, $20,000 was actually paid during 1921 and the balance was actually paid during the early part of 1922 and it was stipulated that if a deduction was allowable in any year, it was allowable in 1921.
There were two indictments against the petitioner corporation charging the petitioner with engaging in unlawful combinations and conspiracies in restraint of interstate trade and commerce in violation of an Act of Congress approved July 2, 1890, entitled: "An Act to protect trade and commerce against unlawful restraints and monopolies"; that the petitioner and the other defendants, in pursuance of an understanding and agreement among them so to do, carried on their interstate trade and commerce without any competition between any of the said defendants and other terra cotta manufacturers who were members of the National Terra Cotta Society as to prices, quantity, quality, or sales of terra cotta. The indictments in various counts charged the petitioner in more detail as follows: That, it, in conjunction with its*3074 codefendants, had divided the United States into territories and refrained from competing outside its own territory, had sold terra cotta at arbitrary, noncompetitive and excessive prices, had submitted bids for contracts at arbitrary and excessive prices, had refrained from competing for additions, alterations or extensions to work originally performed by others, had confined itself to an agreed percentage of the business in its own territory, and had committed other like acts which had the effect of eliminating competition and restraining trade.
OPINION.
TRAMMELL: The petitioner contends that the attorneys' fees and other expenses incurred by it in defending itself against the indictments were ordinary and necessary expenses incurred in carrying on its trade or business and were deductible from its gross income.
*1291 Upon the authority of the cases of , and , it is held that the amounts in question are not deductible.
Reviewed by the Board.
Judgment will be entered under Rule 50.
PHILLIPS, GREEN, and MILLIKEN dissent.