E.L. Welch Company was a corporation involved in the grain business. Welch (plaintiff) served as the secretary of the corporation before it went bankrupt and was discharged from its debts. Welch was subsequently hired as a commission agent for Kellogg Company, a corporation also in the grain business. In an effort to reconnect with old customers he had known through the E.L. Welch Company, and to strengthen his credit and reputation, Welch substantially repaid E.L. Welch’s debts. On his tax return for those years, Welch deducted the amount of these repayments as business expenses. The Commissioner determined that the repayments were not necessary and ordinary expenses, but rather capital outlay for the purpose of developing his reputation and good will. The Board of Tax Appeals held for the Commissioner. The Court of Appeals affirmed.