Taxpayer, a securities dealer, was tried and convicted of mail fraud and of fraud under the 1933 Securities Act, and conspiracy to violate these statutes. Thereafter he claimed a tax deduction for legal costs incurred in his defense under the "ordinary and necessary" business expense provision in section 162 of the Internal Revenue Code. The deduction was disallowed by the Commissioner, and this ruling was sustained by the Tax Court. On appeal, the Second Circuit Court of Appeals reversed. Held: Public policy does not preclude the deduction of legal expenses incurred in an unsuccessful criminal defense arising out of, proximately connected with, and required in the conduct of a trade or business. Tellier v. Commissioner, 342 F.2d 690 (2d Cir.), cert. granted, 34 U.S.L. WEEK 3118 (U.S. Oct. 12, 1965) (No. 351).
Legal Fees for Unsuccessful Defense to Criminal Prosecution—An "Ordinary and Necessary" Business Expense?,
40 Wash. L. Rev.
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