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Gilliam v. Commissioner by axeloxenstierna
February 3, 2009, 12:41 am
Filed under: art, law

United States Tax Court

SAM GILLIAM, JR v. COMMISSIONER OF INTERNAL REVENUE

FACTS

Gilliam is, and was at all material periods, a noted artist. His works have been exhibited in numerous art galleries throughout the United States and Europe, including the Corcoran Gallery of Art, Washington, D.C.; the Philadelphia Museum of Art, Philadelphia, Pennsylvania; the Karl Solway Gallery, Cincinnati, Ohio; the Phoenix Gallery, San Francisco, California; and the University of California, Irvine, California. His works have also been exhibited and sold at the Fendrick Gallery, Washington, D.C. In addition, Gilliam is, and was at all material periods, a teacher of art. On occasion, Gilliam lectured and taught art at various institutions.

Gilliam accepted an invitation to lecture and teach for a week at the Memphis Academy of Arts in Memphis, Tennessee. On Sunday, February 23, 1975, he flew to Memphis to fulfill this business obligation.

About one and one-half hours after the airplane departed Washington National Airport, Gilliam began to act in an irrational manner. He talked of bizarre events and had difficulty in speaking. According to some witnesses, he appeared to be airsick and held his head. Gilliam began to feel trapped, anxious, disoriented, and very agitated. Gilliam said that the plane was going to crash and that he wanted a life raft. Gilliam entered the aisle and, while going from one end of the airplane to the other, he tried to exit from three different doors. Then Gilliam struck Seiji Nakamura, another passenger, several times with a telephone receiver. Nakamura was seated toward the rear of the airplane, near one of the exits. Gilliam also threatened the navigator and a stewardess, called for help, and cried. As a result of the attack, Nakamura sustained a one-inch laceration above his left eyebrow which required four sutures. Nakamura also suffered ecchymosis of the left arm and pains in his left wrist.

On arriving in Memphis, Gilliam was arrested by Federal officials. On March 10, 1975, Gilliam was indicted. He was brought to trial. Gilliam paid $8,250 and $8,600 for legal fees in 1975 and 1976.

Gilliam contends that he is entitled to deduct the amounts paid in defense of the criminal prosecution and in settlement of the related civil claim under section 162, as an ordinary expenses of Gilliam’s trades or businesses.

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Needless to say, the Tax Court found that Gilliam’s expenses were not necessary business expenses. The Court held that “In order for the expense to be deductible by a taxpayer, it must be an ordinary expense, it must be a necessary expense, and it must be an expense of carrying on the taxpayer’s trade or business”. It distinguished the Gilliam case from another case where a driver could deduct the costs of dealing with a hit-and-run accident by noting that accidents are a necessary part of driving, while air rage is not a necessary part of air travel.

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Here are some paintings by Mr. Gilliam:

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