Cohan v. Commissioner of Internal Revenue
Issue
Gregory Cohan, the plaintiff, petitioned the U.S. Court of Appeals to review the decision of the Board of Tax Appeals regarding how he treated the loan to his partner on his income taxes and the disallowance of his travel expenses associated with his theater business.
Facts
Gregory Cohan, the taxpayer, was a theatrical manager and producer who was partner with Harris. The earnings were divided amongst the family, each child receiving a quarter and the parents received half. After his father’s death, the family hired Harris as manager and the profits were redistributed to include Harris. Cohan and Harris each owned 50% of the shares of a company which held the lease of their theater in Chicago. They dissolved their partnership and Cohan loaned him $150,000 to produce his plays at another theater. Harris’s profit was to go towards the loan. Harris final payment was made with turning over his shares in the company. Cohan deducted the loan from his income taxes which the Board disallowed because there was no evidence of depreciation of the lease. The Board also disallowed Cohan’s travel expenses associated with his business because he had no record of any travel.
Law
The U.S. Court of Appeals agreed with the disallowance of the loan from his income taxes. “His theory is either that it was an expense of his business, or that it purchased certain wasting rights which should be annually amortized. Neither position is good in law. The loan was originally to be repaid out of Harris's earnings from the theatre, apparently on …show more content…
Court of Appeals affirmed the decision of the lower court in favor of the Government and remanded the court to allow some of the expenses for travel for the defendant because some travel did occur and are deductible on the taxpayer’s income taxes. He was unable to deduct the loan because there was no evidence showing that the loan was either amortized or
Issue
Gregory Cohan, the plaintiff, petitioned the U.S. Court of Appeals to review the decision of the Board of Tax Appeals regarding how he treated the loan to his partner on his income taxes and the disallowance of his travel expenses associated with his theater business.
Facts
Gregory Cohan, the taxpayer, was a theatrical manager and producer who was partner with Harris. The earnings were divided amongst the family, each child receiving a quarter and the parents received half. After his father’s death, the family hired Harris as manager and the profits were redistributed to include Harris. Cohan and Harris each owned 50% of the shares of a company which held the lease of their theater in Chicago. They dissolved their partnership and Cohan loaned him $150,000 to produce his plays at another theater. Harris’s profit was to go towards the loan. Harris final payment was made with turning over his shares in the company. Cohan deducted the loan from his income taxes which the Board disallowed because there was no evidence of depreciation of the lease. The Board also disallowed Cohan’s travel expenses associated with his business because he had no record of any travel.
Law
The U.S. Court of Appeals agreed with the disallowance of the loan from his income taxes. “His theory is either that it was an expense of his business, or that it purchased certain wasting rights which should be annually amortized. Neither position is good in law. The loan was originally to be repaid out of Harris's earnings from the theatre, apparently on …show more content…
Court of Appeals affirmed the decision of the lower court in favor of the Government and remanded the court to allow some of the expenses for travel for the defendant because some travel did occur and are deductible on the taxpayer’s income taxes. He was unable to deduct the loan because there was no evidence showing that the loan was either amortized or