## Facts

- Paul Snyder was an active attorney who practiced law about 40 hours per week.
- Before 1972, Snyder’s photography consisted mainly of family snapshots with modest equipment not suited to commercial work.
- In 1972, Snyder began working on a book of photographs of the Colorado high country, expecting to publish and sell it for profit.
- Snyder substantially increased his photography efforts, spending about 30 hours per week on the project in addition to his law practice.
- He purchased sophisticated large-format photographic equipment, increased film use from a handful of rolls in 1971 to roughly 200 rolls in 1972, and kept detailed technical records.
- After about a year, Snyder accumulated approximately 3,000 slides and contacted publishers about the book.
- Several publishers expressed interest; Snyder traveled to New York to meet with some of them. He also traveled to San Francisco (with expenses paid by Scribners & Sons) to discuss the project with an editor associated with the Sierra Club.
- No publisher agreed to buy or publish the book during the tax years at issue.
- On their joint returns for 1972 and 1973, Paul and Helen Snyder claimed deductions for expenses connected to the photography-book project; most of their income for those years came from Snyder’s law practice.
- The IRS disallowed the deductions and assessed additional income taxes (about $6,913.41). The Snyders paid, filed a refund claim, and then sued for a refund in federal district court.
- The district court ruled for the United States, finding Snyder had a sincere hope of selling the book and making a profit but concluding he was creating a “literary capital asset” and was not in the trade or business of producing a book during 1972–73, appearing to accept the view that a person cannot be in the business of writing without having produced a book.

## Issues

1. Whether the district court’s findings of fact and conclusions of law were sufficient under Federal Rule of Civil Procedure 52(a) to permit appellate review of the deductibility of Snyder’s 1972–73 book-project expenses.
2. Whether Snyder’s 1972–73 expenditures were currently deductible under I.R.C. § 162(a) (trade or business expenses) or I.R.C. § 212 (expenses for the production or collection of income), or instead were noncurrent capital costs of creating a “literary capital asset.”
3. Whether the district court erred by treating the absence of a completed book as dispositive of whether Snyder could be engaged in a trade or business (or income-producing activity) connected to producing the book.

## Decision

- The Tenth Circuit vacated the district court’s judgment and remanded.
- The court held the district court’s findings and legal conclusions were too conclusory to allow meaningful appellate review of the claimed deductions.
- The Tenth Circuit did not decide whether Snyder’s expenses were deductible under § 162(a) or § 212, nor did it finally determine which items were capital versus currently deductible.
- On remand, the district court was directed to make more specific findings and separately stated legal conclusions addressing the governing standards, including Snyder’s purpose in undertaking the activity and the tax characterization of the expenditures.

## Legal Principles

- In a bench trial, Rule 52(a) requires the trial court to “find the facts specially” and “state separately its conclusions of law,” in enough detail to show the basis for the result.
- Appellate review is not workable when the trial court states only ultimate conclusions without explaining the subsidiary facts and reasoning used to apply the controlling legal standards.
- Whether expenses are deductible under I.R.C. § 162(a) depends on whether the taxpayer was carrying on a trade or business, which commonly turns on a fact-based evaluation of intent and profit objective.
- I.R.C. § 212 can allow deductions for expenses paid for the production or collection of income even when the taxpayer is not engaged in a trade or business, but the analysis still requires careful findings tied to the statutory standards.
- Distinguishing currently deductible expenses from capital expenditures requires attention to the nature of the item and the expected duration of its benefit; broad labels such as “capital asset” do not substitute for analysis of specific expense categories.
- A categorical rule that a person cannot be engaged in the business of writing or producing a book until a completed work exists is not a sufficient substitute for the required factual and legal analysis.

## Conclusion

The Tenth Circuit vacated and remanded because the district court’s Rule 52(a) findings did not adequately explain how the court applied the standards under I.R.C. §§ 162(a) and 212 and the capital-versus-expense distinction to Snyder’s prepublication photography-book costs, leaving the appellate court unable to review the denial of the deductions on the existing record.


Snyder v. United States, 674 F.2d 1359 (1982)