Mires v. United States

Entrepreneur and real estate venturer S. N. Goldman had two children, Alfred and Monte. Following SN’s death, Alfred and Monte jointly owned SN’s business interests (the Goldman business entities), and Alfred managed those interests with Monte’s consent. Alfred and Monte eventually began fighting. Alfred asserted that he was owed a larger share of the Goldman business entities’ assets because he managed the investment properties that he jointly owned with Monte and because Monte had withdrawn $11 million more from the Goldman business entities than Alfred had over the years. Alfred decided to put Monte on an $8,000 monthly allowance, even though the Goldman business entities were making roughly $4 million per year. In March 1990, Monte demanded an accounting of the Goldman business entities’ funds, the right to inspect the Goldman business entities’ books and records, and a distribution of 50 percent of all income and profits from the Goldman business entities. Following Monte’s demand, Alfred appropriated for himself roughly $23 million in cash from the Goldman business entities through transfers to foreign bank accounts and other transactions. Alfred also caused the Goldman business entities to convey 29 properties to a revocable living trust in Alfred’s name. Monte sued Alfred in Oklahoma state court and obtained a restraining order directing Alfred to return certain property to Monte. The court also appointed a receiver over the Goldman business entities. Alfred counterclaimed, seeking an accounting and recognition of his title to some of the properties. Alfred and Monte eventually settled their dispute in 1994, after they had incurred approximately $3 million in legal and accounting fees in the litigation. A Subchapter S corporation of which both Alfred and Monte were shareholders claimed a business-expense deduction for the fees on its income-tax returns for 1990, 1991, and 1992. The Internal Revenue Service (IRS) disputed and ultimately disallowed the majority of the fee deductions. Alfred and Monte subsequently passed away, and Arthur Mires and other trustees of various trusts related to Alfred and Monte (collectively, the trustees) (plaintiffs) sued the federal government (defendant) for a refund of alleged tax overpayments, asserting that the IRS had improperly denied the fee deductions. The parties cross-moved for summary judgment.