United States Supreme Court Cases & Opinions

U.S. Supreme Court

Lilly v. Commissioner, 343 U.S. 90 (1952)

Lilly v. Commissioner

No. 158

Argued December 3, 1951

Decided March 10, 1952

343 U.S. 90

Syllabus

Petitioners were engaged in the optical business in North Carolina and Virginia in 1943 and 1944. Pursuant to agreements reflecting an established and widespread practice in that industry in those localities, they paid to the respective doctors who prescribed the eyeglasses which they sold one-third of the retail sales price received for the glasses.

Held:

1. Such payments were deductible by petitioners as "ordinary and necessary" business expenses under § 23(a)(1)(A) of the Internal Revenue Code. Pp. 343 U. S. 91-94.

2. Disallowance of the deductions on the ground that the payments violated or frustrated "public policy" was unwarranted, since, in 1943 and 1944, there was no governmentally declared public policy, national or state, proscribing such payments. Textile Mills Corp. v. Commissioner, 314 U. S. 326, distinguished; Commissioner v. Heininger, 320 U. S. 467, followed. Pp. 343 U. S. 94-97.

188 F.2d 269, reversed.

The Commissioner's determination of a deficiency in petitioners' income tax was sustained by the Tax Court. 14 T.C. 1066. The Court of Appeals affirmed. 188 F.2d 269. This Court granted certiorari. 342 U.S. 808. Reversed and remanded, p. 343 U. S. 98.

Page 343 U. S. 91