Fred W. Amend Co. v. Commissioner of Internal Revenue

Fred W. Amend Co. (the company) (plaintiff) was a candy manufacturer started by Fred W. Amend. In 1954 Amend, now the company’s treasurer and chairman of the board of directors, began consulting with R. M. Halverstadt, a Christian Science practitioner. Amend paid Halverstadt to help him think through business and personal problems, and the company reimbursed Amend for the fees associated with the business-related consultations. In 1964 the company hired Halverstadt as a consultant for employees of the company to discuss best approaches to business problems. Amend was the only employee who worked with Halverstadt. Amend would discuss business issues with Halverstadt, and Halverstadt would talk Amend through the issues. Halverstadt did not offer any concrete advice or solutions, instead talking and praying with Amend to help Amend achieve greater clarity and spiritual awareness. The company deducted the amount it paid Halverstadt from its income taxes as business expenses. The Commissioner of Internal Revenue (the Commissioner) (defendant) disallowed the tax deductions because, the Commissioner reasoned, Halverstadt’s compensation was a personal expense, not a business expense. The United States Tax Court upheld the Commissioner’s disallowance, arguing that Amend received inherently personal benefits from Halverstadt that were tied to Amend’s spirituality. The company appealed.