Description

Write an essay answering the following question: Should there be a public policy exception that disallows Section 162 deductions for illegal enterprises?

In answering this question: provide a very brief background on Section 162 deductions; discuss relevant court opinions, tax court memorandums, IRS letter rulings, or other controlling decisions regarding public policy exceptions to Section 162; state the reasons for your opinion; consider the competing arguments to your opinion and show why those arguments do not persuade you; describe biblical reasons in support of or against a public policy exception.

Use scholarly sources such as the Code, Supreme Court decisions, Tax Court decisions, and scholarly articles to support your position. In addition to a References page in APA format, this Essay should be 4-5 pages, double spaced.

Section 162 of the Code allows for business deductions of expenses that are ordinary and necessary. This deduction allowance becomes problematic when the owner of a business conducting illegal operations files tax returns and deducts the ordinary and necessary expenses of those illegal actions.

Some argue that in cases of illegal activity, there should be a public policy exception to Section 162 deductions, and any ordinary and necessary deductions stemming from illegal activity should be disallowed. Others, including the Supreme Court in Commissioner v. Tellier, 383 U.S. 687 (1966), state that there is no public policy exception to Section 162 and that income tax is a tax on net income, regardless of where or how the income is derived