Tank Truck Rental, Inc. v. Commissioner of Internal Revenue (1958) -

Описание: FACTS:
Tank Trucks Rentals, Inc. was a trucking company that operated large, heavy tank trucks across multiple states. To make more deliveries and increase profits, the company regularly overloaded its trucks, violating state highway weight limits.

Every time they got caught, they were fined by the states for those violations. Over time, the company paid thousands of dollars in fines, and when tax season came, they deducted those fines as business expenses, calling them "ordinary and necessary costs" of doing business.

The IRS disagreed and said, "You can't deduct penalties for breaking the law." The company appealed, arguing that for them, fines were just a regular part of operations, basically, a cost of doing business.

ISSUE:
Can a business deduct fines paid for violating state laws as "ordinary and necessary" business expenses under federal tax law?

HOLDING:
No.
The U.S. Supreme Court ruled that fines and penalties for illegal acts are not deductible as business expenses.
"Allowing such deductions would frustrate sharply defined national or state policies proscribing particular types of conduct."

RULE OF LAW:
Under the Internal Revenue Code expenses that violate public policy, such as fines, penalties, or bribes, cannot be deducted, even if they are connected to business operations.

REASONING:
1. Deductions are a matter of legislative grace, not a taxpayer's right.
2. If the Court allowed illegal fines to be deductible, it would undermine the punishment's purpose, letting lawbreakers benefit financially.
3. The IRS and the courts must uphold public morality, the tax code cannot be used to soften the cost of illegal activity.

TAKEAWAY:
"You can't write off wrongdoing." If you break the law, you can't turn that into a tax deduction, no matter how common it is in your business.

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