## Facts

- Nelson A. Rockefeller served as Governor of New York from 1959 to 1973 and previously held other federal positions.
- After resigning as governor in 1973, Rockefeller did not hold elective or appointive public office and instead worked on nongovernmental commissions.
- In 1974, Rockefeller was nominated for Vice President of the United States under the Twenty-Fifth Amendment and underwent congressional investigations and confirmation hearings.
- Rockefeller incurred $550,159.78 in expenses, primarily legal and other professional fees, connected to the confirmation process.
- On the Rockefellers’ 1974 joint federal return, they claimed a business-expense deduction for $63,275 (equal to the vice-presidential salary) and later asserted the full amount was deductible as an expense of a continuing “public service” trade or business.
- The IRS disallowed the deduction, resulting in a deficiency; the Tax Court upheld the disallowance on a stipulated record, and the Estate appealed.

## Issues

1. Whether the confirmation-hearing expenses were “ordinary and necessary” expenses paid or incurred “in carrying on any trade or business” and therefore deductible under I.R.C. § 162(a).
2. Whether Rockefeller was engaged in a continuing trade or business of performing public office such that confirmation-related expenses were incurred in carrying on that business rather than seeking a new position.

## Decision

- The Second Circuit affirmed the Tax Court.
- The court held the $550,159.78 was not deductible under I.R.C. § 162(a) because it was not incurred “in carrying on” an existing trade or business.
- The court rejected the Estate’s characterization of Rockefeller’s trade or business as an overarching, continuous “public service” business.
- The court treated the expenditures as incurred to obtain or qualify for a new office (the vice-presidency), making them nondeductible.
- Certiorari was denied.

## Legal Principles

- I.R.C. § 162(a) permits deductions only for ordinary and necessary expenses incurred while the taxpayer is carrying on an existing trade or business.
- Expenses incurred to enter a new trade or business or to obtain a new position are generally nondeductible, even if the new position is in the same general field as prior work.
- A taxpayer cannot convert pre-entry or qualification costs into § 162(a) business expenses by defining the trade or business at a high level of generality (e.g., “public service”) when the taxpayer is not currently holding the office or position at issue.

## Conclusion

The court denied a deduction for legal and professional fees incurred during vice-presidential confirmation proceedings because the expenses were incurred to secure a new office rather than in carrying on an existing trade or business under I.R.C. § 162(a).


Estate of Rockefeller v. Commissioner, 762 F.2d 264 (2d Cir. 1985), cert. denied, 474 U.S. 1037 (1986)