Welch v. Helvering

Infobox SCOTUS case
Litigants=Welch v. Helvering
ArgueDate=October 19
ArgueYear=1933
DecideDate=November 6
DecideYear=1933
FullName=Thomas Welch v. Guy T. Helvering, Commissioner of Internal Revenue
USVol=290
USPage=111
Citation=54 S.Ct. 8; 78 L.Ed. 212
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Holding=Welch′s repayments of his discharged debts were not ordinary and necessary business expenses, and therefore not deductible under Sec. 162 of IRC.
SCOTUS=1932-1937
Majority=Cardozo
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"Welch v. Helvering", 290 U.S. 111 (1933), was decision by the United States Supreme Court on the difference between business and personal expenses, and the difference between ordinary business deductions and capital expenses. It is one of the most important income tax law cases.

Thomas Welch and his father owned a grain brokerage business in Minnesota, that went bankrupt in 1922. Welch later re-opened a business, but first had to repay his discharged debts. He then tried to deduct the repayments, but the Commissioner said no.

Justice Benjamin N. Cardozo, delivering the courts opinion, held that the expenses were too personal, that they were too bizarre to be ordinary, and that they were capital. He did not consider them “ordinary and necessary business expenses”, and therefore not deductible under Section 162 of the Internal Revenue Code.

ee also

*List of United States Supreme Court cases, volume 290

Further reading

*cite book |title=Tax stories: An in-depth look at ten leading federal income tax cases |chapter=The Story of "Welch": The Use (and Misuse) of the ‘Ordinary and Necessary’ Test for the Deductibility of Business Expenses |last=Newman |first=Joel S. |authorlink= |editor=Caron, Paul L. (ed.) |year=2002 |publisher=Foundation Press |location=New York |isbn=1587784033 |pages=155–182