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Surasky v. United States

United States Court of Appeals for the Fifth Circuit
325 F.2d 191 (1963)


Facts

Surasky (plaintiff) purchased 4,000 shares of Montgomery Ward & Co. at the advice of Louis E. Wolfson, a substantial shareholder in the company. Wolfson developed an elaborate plan that he believed would improve the company and result in an increase in its stock value. The plan included such objectives as electing a new board of directors, introducing new management, and ultimately achieving an increase in dividends. Wolfson, together with Surasky and other stockholders, established a committee to implement the plan. In 1955, Surasky contributed $17,000 to the committee in the hopes of generating more income from his investment. The committee managed to achieve some of its stated goals. Three of the nine board members were replaced and two original members of management resigned. Furthermore, the company enjoyed an increase in dividends in the latter half of the year. Surasky deducted the $17,000 expenditure as an ordinary and necessary non-business expense. The district court ruled that Surasky was not entitled to the deduction.

Rule of Law

Issue

Holding and Reasoning (Tuttle, C.J.)

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