Haldeman v. Franchise Tax Board

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Opinion

McCLOSKY, J.

Statement of Case

Appellants Harry R. Haldeman and Joanne H. Haldeman filed a “Complaint for Refund of Personal Income Taxes” for the years 1974, 1975 and 1976 against the Franchise Tax Board (hereafter Board). In a court trial on stipulated facts, the court gave judgment against appellants and in favor of respondent Board. Appellants filed a timely notice of appeal.

Statement of Facts

The operative stipulated facts on which the case was tried may be summarized as follows:

The Haldemans became residents of California on approximately June 30, 1973. At all relevant times prior to that date, Mr. Haldeman was employed as Chief of Staff for the White House and the Haldemans lived in the State of Maryland.

The Haldemans remained residents of California for the balance of 1973 and during the years 1974, 1975 and 1976. During 1974, 1975 and 1976, Mr. Haldeman earned a total of $106,200 for writing and making television appearances relating to his knowledge and personal involvement as White House Chief of Staff, including his knowledge of the so-called Watergate matters.

1

All of that income was subject to California tax and the Haldemans reported it as such. They deducted as ordinary and necessary expenses, however, the attorneys’ fees and other defense costs totalling $124,942, which Mr. Haldeman incurred and paid in the years 1974, 1975 and 1976 for legal fees and other defense costs arising from Mr. Haldeman’s personal involvement as White House Chief of Staff with the Watergate trials, Senate Watergate hearings, and related topics. The tax effect of the deductions in 1974, 1975, and 1976 is as follows: 1974-$3,896.48; 1975-$8,553.93; and 1976-$55.46. The Haldemans have not deducted these legal fees on any other state tax return.

The parties stipulated that if the court determined that the deductions should be allowed, the Haldemans are entitled to a refund of those amounts, plus interest.

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