## Facts

- Talbot Patrick, a newspaper executive and substantial shareholder in a closely held publishing company, and his wife held significant interests in business property, real estate, and securities.
- Patrick’s wife filed for divorce in South Carolina alleging adultery.
- The parties, through counsel, conducted extended negotiations that produced a property-settlement agreement resolving support and financial claims arising from the marriage.
- The divorce court granted an absolute divorce, approved the settlement, and ordered Patrick to pay attorneys’ fees for both parties.
- The settlement addressed child custody and support, assigned one house to each spouse, and rearranged interests in the newspaper-related stock and real property.
- On his 1956 federal income tax return, Patrick deducted legal fees he paid for his own attorneys and his wife’s attorneys incurred in the divorce and settlement.
- The IRS disallowed the deduction; Patrick sued for a refund, and the district court and court of appeals allowed the deduction under I.R.C. § 212(2).

## Issues

1. Whether legal fees paid in divorce proceedings and a related property settlement are deductible under I.R.C. § 212(2) as expenses for the “management, conservation, or maintenance” of income-producing property when the settlement affects control of a business.

## Decision

- The Supreme Court reversed the judgment allowing the deduction.
- The Court held that none of the legal fees were deductible under § 212(2).
- The Court concluded the wife’s claims arose from the marital relationship rather than any profit-seeking activity, making the expenses personal and nondeductible.

## Legal Principles

- Deductibility of legal fees under I.R.C. § 212(2) turns on the “origin and character” of the claim giving rise to the expense, not the taxpayer’s purpose or the expense’s economic consequences.
- Legal expenses attributable to claims rooted in the marital relationship (divorce, support, and marital property rights) are personal expenses even if the litigation or settlement affects income-producing property or business control.

## Conclusion

The Court disallowed deductions for divorce-related legal fees because the underlying claims stemmed from the marital relationship; the fact that the settlement also preserved or rearranged interests in income-producing property did not convert those personal expenses into deductible § 212(2) expenses.


United States v. Patrick, 372 U.S. 53 (1963)