*3428 Expenses paid by the petitioner in defending himself against a criminal charge are not deductible as ordinary and necessary business expenses.
*836 This is a proceeding for the redetermination of a deficiency in income tax for the calendar year 1922 in the amount of $7,041.52. A deficiency was asserted for the calendar year 1923 in the amount of $97.57 which was not contested by the petitioner.
The question involved is whether the petitioner is entitled to a deduction in determining his income on account of payment of attorneys' fees and other expenses in defending a criminal prosecution instituted against him.
FINDINGS OF FACT.
The petitioner is an individual residing in New York City. During the years 1921 and 1922 he was manager of the Madison Square Garden Corporation and as such was engaged in the business of the promotion and management of sports events, professional boxing contests and the operation of a swimming pool at Madison Square Garden in New York City. During the year 1922 the petitioner was indicted by the Grand Jury in*3429 the County of New York, State of New York, charged with a criminal offense against a patron of the Madison Square Garden swimming pool, which was under the personal management of the petitioner.
After the petitioner was indicted he was requested by the officers and directors of the Madison Square Garden Corporation to resign his position as manager and was further advised that, until he had been exonerated of charges in said indictment, he would not be eligible for the position of manager and matchmaker for Madison Square Garden Corporation. The New York State Athletic Commission, at its regular convened meeting, demanded that petitioner resign as matchmaker of the Madison Square Garden Corporation under penalty of suspension. Petitioner did thereupon resign and give up his said position.
Subsequently and during the year 1922 the petitioner was tried for the crime for which he was indicted and was speedily acquitted.
In his defense of the aforesaid criminal charge, the petitioner incurred the following necessary expenses:
| Fees to detective agencies | $15,000 |
| Attorney's fees | 47,500 |
| 62,500 |
*837 The expenses incurred as aforesaid were paid by the*3430 petitioner during the year 1922 and deducted by him as a business expense in his return filed for that year. The Commissioner disallowed said deduction from petitioner's gross income.
The petitioner kept his books and made his return for 1922 on a cash basis.
OPINION.
TRAMMELL: The petitioner contends that the amount expended by him in defense of the criminal prosecution is an ordinary and necessary expense of his business and is therefore deductible in determining his net income. The evidence does not disclose the nature of the criminal offense. It does not disclose in what way, if any, the criminal offense was connected with the petitioner's business, that is, the business of promoting and managing boxing contests, other amusements and the operation of a swimming pool. There is no evidence to indicate that the business carried on by the petitioner was proximately related or related in any way to the criminal charge, or that the criminal charge proximately resulted from petitioner's business. The offense charged, according to the stipulated facts, was "a criminal offense against a patron of the Madison Square Garden swimming pool." We are unable to see how the management*3431 of the swimming pool is necessarily accompanied by the commission of a criminal offense against a patron or by the accusation of the commission of an offense against a patron. Criminal offenses against patrons of a swimming pool are certainly not ordinary and necessary business acts connected with the operation of the swimming pool. In other words, it is not shown that the act which gave rise to the accusation was a business act in connection with the carrying on of the petitioner's business activities. See ; ; .
The petitioner cites in support of his contention the case of . We do not think, however, that case has any material bearing upon the situation here presented. No criminal offense was involved in that case. The attorneys' fees and expenses involved in the Kornhauser case were incurred in defense of a suit for an accounting brought by a former partner.
In view of the foregoing, it is our opinion that the attorney's fees and other expenses paid by the petitioner*3432 in defending himself *838 from the criminal prosecution were not ordinary and necessary expenses of his trade or business and are, therefore, not deductible.
Judgment will be entered for the respondent.