Saturday, May 4, 2013

Commissioner v. Tellier case brief

Commissioner v. Tellier case brief
383 U.S. 687, 86 S. Ct. 1118, 16 L. Ed. 2d 185, 1966 U.S.

CASE SYNOPSIS: Petitioner Commissioner of Internal Revenue sought certiorari review of a decision from the United States Court of Appeals for the Second Circuit, which reversed the tax court's order denying respondent dealer's attempt under 26 U.S.C.S. § 162(a) to deduct from his income the legal expenses he incurred in defending himself in a criminal action.

FACTS: Respondent was a securities dealer convicted of violating the Securities Act of 1933, 15 U.S.C.S. § 77q(a), the mail fraud statute, 18 U.S.C.S. § 1341, and conspiring to violate those statutes under 18 U.S.C.S. § 371. Respondent claimed the legal expenses he incurred in his defense as a deduction on his federal income tax return. The Commissioner of Internal Revenue and the tax court conceded that respondent's legal expenses were "ordinary" and "necessary" under 26 U.S.C.S. § 162(a), but disallowed the deduction. In respondent's appeal, the appellate court reversed the order.

On certiorari review, the United States Supreme Court held that the criminal charges stemmed from respondent's securities business and that the legal fees were expenses incurred in carrying on a trade or business under § 162(a).

Respondent's expenses were ordinary business expenses and not capital expenditures since no capital asset was acquired. The Court rejected the idea that the deduction was disallowable as against public policy because no exception to § 162(a) was warranted and because legal expenses were not specifically mentioned in the category of expenses that Congress found nondeductible.

CONCLUSION: The Court affirmed the decision.

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