Commissioner v. Tellier
United States Supreme Court
383 U.S. 687 (1966)
Relevant factsFree
Tellier (plaintiff) was convicted on 36 counts of fraud and conspiracy related to his securities-underwriting business, and deducted the roughly $23,000 he spent defending himself as an ordinary and necessary business expense; the Commissioner (defendant) disallowed the deduction on public-policy grounds, arguing that allowing a deduction for defending illegal business conduct would improperly soften the consequences of wrongdoing. The Tax Court sided with the Commissioner, and the court of appeals reversed.
IssueFree
Whether courts may disallow deductions otherwise allowable under section 162 of the Internal Revenue Code on public policy grounds for legal expenses incurred in defense of criminal charges.