Question

Should there be a public policy that disallows Section 162 deductions for illegal enterprises?

Answer 1

Yes, there should be Public Policy that disallows section 162 , below is given reference to your question :-

It is commonplace that items which would be deductible under theusual rules for computing taxable income will be denied deduction if theirallowance is deemed to frustrate a clearly defined public policy.' Thereis, however, a curious lack of clarity as to the rationale and scope of thisdoctrine. Although there are many decisions of lower courts on the sub-ject, the pronouncements of the Supreme Court are few and somewhatambivalent.2 Moreover, although there have been proposals for clarifyinglegislation in the past,3 only one facet of the doctrine has been codifiedthus far' and it seems unlikely that further congressional action willoccur in the near future. Finally, little of the extensive literature hasbeen concerned with a conceptual view of the subject.'What is needed is a framework for critical appraisal of the doctrine.In an attempt to provide such a framework this discussion will beoriented toward five basic ideas: the net income concept, the roles ofpunishment and subsidy, the idea of federalism, the requirements of goodadministration, the proper exercise of rule-making power. However,before proceeding to a description and discussion of these five points of orientation and their relevance to the public policy doctrine, some com-ments of a more general nature are necessary.