## Facts

- Sanitary Farms Dairy, Inc. operated a milk and milk-products business in Erie, Pennsylvania.
- O. Carlyle Brock (president/treasurer/director) and his family controlled most of the corporation’s stock; some shares were held by employee minority shareholders.
- Since 1938, Brock had used hunting-related activities as a continuing advertising program: hosting game dinners for customers/prospects and displaying trophies in a public “museum” at the plant.
- In 1950, Brock and his wife traveled abroad, including a big-game hunt in Africa, intending to obtain trophies and produce letters, photographs, and motion pictures for use in the corporation’s promotional program.
- Trip-related materials generated local publicity while the Brocks traveled, and after their return the safari film was shown at the museum; the corporation distributed free tickets through its delivery routes to current and prospective customers.
- The corporation deducted $16,818.16 as advertising expense for 1950; the Commissioner allowed $1,200 and treated $15,618.16 as taxable income to the Brocks.
- The Commissioner also affirmatively alleged additional disallowances: $2,428 in foreign-travel costs and certain amounts paid by the corporation to Brock’s son and daughter as purported compensation.

## Issues

1. Whether the corporation’s payment of the Brocks’ foreign travel and African safari costs was an “ordinary and necessary” business expense deductible as advertising, rather than a personal expense producing taxable income to the Brocks.
2. Whether additional foreign-travel costs and amounts paid to the shareholders’ children were properly deductible corporate expenses.

## Decision

- The Tax Court held that the cost of sending two principal officers on the African big-game hunt was an ordinary and necessary expense of the corporation’s business and was deductible as advertising.
- The court rejected the Commissioner’s recharacterization of the bulk of the safari expenditures as personal income to the Brocks.
- The court addressed other disputed items (including additional travel and payments to the children) by examining whether each was sufficiently connected to business purposes or constituted compensation for services.

## Legal Principles

- Advertising expenditures may qualify as “ordinary and necessary” business expenses even when the promotional method is unconventional, if the spending is appropriate and helpful to the business.
- In determining deductibility where owner-managers receive personal enjoyment, the inquiry centers on the primary business purpose and objective evidence that the expenditure furthered an established promotional program.
- Corporate payments that primarily serve personal objectives can be recharacterized as taxable income to shareholders; conversely, personal enjoyment does not bar deduction when the dominant purpose and actual use are business-related.
- Deductions for payments to related parties (including family members) depend on proof that amounts were paid for bona fide services or business benefits rather than as disguised distributions.

## Conclusion

The Tax Court treated the African safari costs as part of a long-running, business-directed advertising program and allowed the corporation to deduct them as ordinary and necessary expenses, rather than taxing the expenditures to the controlling shareholders as personal benefits.


Sanitary Farms Dairy, Inc. v. Commissioner, 25 T.C. 463 (1955)