Commissioner v. Tellier,
383 U.S. 687 (1966)

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U.S. Supreme Court

Commissioner v. Tellier, 383 U.S. 687 (1966)

Commissioner v. Tellier

No. 351

Argued January 27, 1966

Decided March 24, 1966

383 U.S. 687


Respondent securities dealer was tried and found guilty of violating the Securities Act of 1933, the mail fraud statute, and of conspiring to violate those statutes. His conviction was affirmed on appeal. He claimed a deduction on his income tax return for legal fees incurred in defending the prosecution. Although the Commissioner conceded that the fees were ordinary and necessary expenses of the respondent's securities business within the meaning of 26 U.S.C. §162(a), and therefore deductible under the literal requirements of that section, he disallowed the deduction on the ground of public policy. The Tax Court sustained his position, but was reversed by the Court of Appeals.


1. The federal income tax is a tax on net income, and is not a sanction against wrongdoing. P. 383 U. S. 691.

2. Deductions of expenses encompassed by §162(a), in the absence of specific legislation, are disallowed only where their allowance would severely and immediately frustrate sharply defined national or state policies proscribing particular forms of conduct. Pp. 383 U. S. 693-694.

3. Where, as here, an accused exercises his constitutional right to employ counsel to defend against criminal charges, there is no offense to public policy, and deduction of the expenses of his defense is proper. Pp. 383 U. S. 694-695.

342 F.2d 690, affirmed.

Page 383 U. S. 688

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