Earl Warren: Number 95, Hoover Motor Express Company versus United States of America and Number 109, Tank Truck Rentals versus Commissioner of Internal Revenue. Mr. Sarner.
Leonard Sarner: If Your Honors please. You'll recall that Mr. Harwood was presenting the argument -- part of the argument on behalf of both these carriers and he has a little time left. He'd like to reserve that until the end of the argument to present these points. If you will read now to these -- these cases involved the deductibility for income tax purposes of fines paid to various States were operating on a highways at these States, motor vehicles which exceeded the maximum weights or actual weight limitations prescribed by the States. The -- they raised the problem with the allied case, cases of Sullivan, Massei and Ross of the use of a public policy rationale or as the Government is raising in the allied cases, payments which are made for the -- to obtain the commission of a crime by the recipient as being excluded from this concept of ordinary and necessary business expenses for purposes of deduction. Of course, I think, we'll all agree that the use of public policy that to allow us for example to deduct these fines in someway remits, reduces the punishment using it in a broad sense which the State has imposed upon us for exceeding this weight laws or its subsidiary that you can't deduct illegal payments and I call your attention Your Honors that this is a subsidiary argument and subsidiary rationale. The reason why illegal payments if they cannot be deducted would depend again on the fact that it frustrates the policy of the State which makes this activity for which the payment has made a particular crime or proscribes its commission, of course, this has a smooth sounding clause ability. I mean it may shock all of us, most of us, that businessmen will transgress the law and that when they're following for this transgression, when they're so-called punished for the transgression or when they want to make payments which are proscribed, which are designated possibly a crime or some sort of prohibited activity that the tax law should so recognize these payments as to allow that deductibility in computing the revenue, the amount which has to be paid to the Government. But Your Honors, this use of public policy or this use of an illegal payment by the Government in these cases which has been, to some extent as we all see, developed in a very confusing way by the Courts is a completely foreign concept to the purposes, to the intendment of the Internal Revenue Code. I'd like Your Honors to look at page 21 of our brief. We quote what the Congress -- what the committee of Congress was considering when the original 1913 bill was passed after the enactment of the Sixteenth Amendment. And at this time, it was suggested by Senator Starling that there should be some amendments to the bill which would limit the deductibility of expenses in computing income to legal expenses, to a legal trade or business. And Senator Williams, who was a ranking member of the committee at that time, said the object of this bill is --
Earl Warren: Did you say 29?
Leonard Sarner: On page 21.
Earl Warren: Oh 21, pardon.
Leonard Sarner: Yes. He said the object of this bill is to tax a man's net income. That is to say, what he has at the end of the year after deducting from his receipts, his expenditures or losses. It is not to reform man's moral characters, that is not the object of the bill at all. The tax is not levied for the purpose of restraining people from betting on horse races or upon futures, but the tax is framed for the purpose of making a man pay upon his net income, his actual profit during the year. The law does not care where he got it form, so far as the tax is concerned although the law may very properly care in another way. Now, I'm sure that my friends representing the -- the respondents in Sullivan, Ross and Massei will amplify this concept of the legislative history and the various times that it was sought by the Congress, by some members of Congress to proscribe the concept of ordinary and necessary by a limitation that it can't be some sort of an illegal expense and all of these times, this was rejected by the Congress.
Felix Frankfurter: How do we know why Congress rejects a proposal?
Leonard Sarner: Well, we made up --
Felix Frankfurter: How can you build -- I don't know why I take it out of view. I --
Leonard Sarner: No.
Felix Frankfurter: -- hear these arguments frequently, sometimes from the Government, and sometimes the Government opposes, but how do we know why an amendment is rejected?
Leonard Sarner: Well we do -- we know in one sense insofar in 1951 Your Honors will see when I'm sure the -- other counsel raised the point, Senator (Inaudible) attempted to have an actual limitation on deductibility of expenses, denying any expenses incurred in the operation of illegal wagering or gambling. And the debates at that point of time point out that this actually would amount to a tax on gross income, not on net income which is the intendment of the Revenue Act. It's not to enforce the -- the particular penalty provisions or the public policies of the -- of the criminal laws of the States, they can take care of themselves and there are many effective ways to do that and that the object of the income tax law, regardless of what maybe the objects of other so-called revenue measures is to produce the fair share of income which a man should pay.
Felix Frankfurter: That's still -- may I put this to you?
Leonard Sarner: Surely.
Felix Frankfurter: When you say public policy, isn't it just as fair to put this problem if we have to -- necessary as in the self defining conflict.
Leonard Sarner: No, sir.
Felix Frankfurter: Since I've been here any number of times. We had all sorts of statutes, so what is included in the conflict if necessary.
Leonard Sarner: Surely.
Felix Frankfurter: Isn't that the real question? So, whenever we come to define the limit or determine the content, what is within the content are necessary or is it ordinary and necessary?
Leonard Sarner: Ordinary and necessary.
Felix Frankfurter: Stage concept -- conjunction of words, anyhow, ordinary and necessary. The things maybe ordinary, they're unnecessary and vice versa. Whenever we come to define and determine what the content is, we have to take into consideration relevant factors --
Leonard Sarner: (Inaudible)
Felix Frankfurter: -- involve that public policy all right.
Leonard Sarner: Well I -- that's --
Felix Frankfurter: -- it's no more a different public policy then other question --
Leonard Sarner: No, sir.
Felix Frankfurter: I'm not saying it -- that gives me the answer. It doesn't give me the answer.
Leonard Sarner: No. Well I think I can give you the answer, Your Honor, and of course that's what I -- I hope to do.
Felix Frankfurter: But I just don't want you to label it --
Leonard Sarner: No.
Felix Frankfurter: -- as a contention of some extraneous consideration (Voice Overlap) --
Leonard Sarner: Well it isn't -- it is an extraneous consideration and the context that it's used by the respondent in this case, and by the weights then used by the lower courts in our two cases, it's completely foreign and extraneous concept having no bail as we all see in any workable rule whatsoever. But I just -- before I -- and I'll answer that in one moment. I do want to make one further point, because this runs through the, seems to me, through the entire Government's position. They take the view that just because an expenditure is economically involved or integral, so intertwined with the production of the income that in and of itself does not make the expense deductible as an ordinary and necessary business expense. We agreed the three quarters of -- of some of the arguments that are made are made or what I say is the straw premise, we don't deny that merely because an expenditure is economically involved in the production of income that it is automatically deductible. We admit that it must be ordinary and necessary, and here an answer to Justice Frankfurter, I think we come to the point of the role that public policy in the context that its used by these courts and by the respondent that in someway the -- the States set forth a policy and to allow an income tax deduction of expenditures made which may be in violation of that policy, frustrates, prevents, interferes with the States' enforcement. That's the sense that‘s used in this so-called public policy rationale.
Charles E. Whittaker: Mr. Sarner, may I ask you? However uncertain may be the meaning in this context of the words ordinary and necessary, does that seem uncertainty obtained to the words business expense?
Leonard Sarner: Possibly the same -- sure I would say the same uncertainty does obtain but I don't think Your Honor that there is this much uncertainty as -- as to the meaning of ordinary and necessary business expenses. We have had Your Honors have decided a number of cases insofar as the business aspect is, what is a business expense, the Kornhauser case points out that if it's approximately results from -- is connected with -- directly connected with the business, it is a business expense.
Charles E. Whittaker: Is there any case which holds that an expenditure made in violation of the law could be a business expense, whether necessary and ordinary to the business or not?
Leonard Sarner: Well, it depends what you mean, Your Honor. In violation -- in violation of law and violation of law has a lot different meanings. There are have been -- there had been cases for example -- well, you take the Ross, Sullivan and -- and Massei cases which will be presented to you. Their expenditures under the Government's view were made by the taxpayer engaged in illegal book making, wagering to employees in the expenditure itself aside from the activity of the taxpayer being to get the employee to himself commit the crime, that's independently made a crime. Seventh Circuit said that this is no question that this is a deductable ordinary -- no they admitted it was a business expense, it was a question of whether it was ordinary and necessary expense. The same thing with respect to the rent in the -- in the Sullivan and Massei cases.
Charles E. Whittaker: But wasn't that a matter expressly covered by the code itself.
Leonard Sarner: Well, the -- the -- that's the taxpayer's argument, that insofar as --
Charles E. Whittaker: Well, doesn't the statute say that?
Leonard Sarner: -- insofar as salaries and rental concern, the taxpayer says that and I wouldn't want to take any position contrary to his. But I think that the Government probably will point out to Your Honors that -- that salaries and rents don't embrace anything further. These are just illustrative of typical types of business expenses which have further limitations on them that salaries must be reasonable. Rent must be not connected with buying the business, buying the property but merely for using it. I don't personally think that -- that -- that is the touchstone the fact that the code happens to designate salary or rent as such. But to come back to what Justice Frankfurter pointed out, in a big sense, public policy and illegality plays a very important part in what is ordinary and necessary. That is when the law of a State, where people are doing business, proscribed certain conduct, when societies for example, professional societies frown upon certain conduct, this puts a general limitation on what people ordinarily and normally do. There is no doubt that if it's illegal to -- to make certain types of payments generally, in the business community, in the reputable business community, people will not make those certain types of payments. But the concept of -- and to that extent, it plays into the concept of ordinary and necessary because ordinary, as Your Honors have pointed out in a number of cases, means common, frequent, normal, usual in this particular type of business and I agree that in a -- in a normal let us say, in the normal legitimate business, it is unusual, it is not common, it is not frequent to find that the taxpayer is bribing public officials to get state contracts to find that the -- that the taxpayer is -- is otherwise violating the law in his expenditures. And hence, it's not that the State proscribes this and says, “This is a -- a criminal act or this is a penalty, we punish you for doing this.” This sets the normal pattern of what people do in the business community, the community with which we are particularly interested. But this Court has also pointed out, Your Honors, in the -- in the Lilly case, the Heininger case, you pointed out that what is ordinary and normal means for a particular business. And therefore, if you have in the gamblers cases, I have no doubt if you have an illegal business and you do have expenses which are integral and normal and common, assuming you as -- you work with the assumption that you do have the illegal business operating, that Government for purposes of revenue, for tax purposes is interested and so intended, when it enacted the Revenue Act to take just the net amount of the income.
Felix Frankfurter: Well, if the Government could -- the presupposition of that -- this whole business with regard to gambling game is that that's also a form of business, isn't it?
Leonard Sarner: Surely. Oh, yes.
Felix Frankfurter: And since it's a business, the Government can have it both ways --
Leonard Sarner: No. It can't --
Felix Frankfurter: It's a business for one purpose and not for another.
Leonard Sarner: Well, that exactly right. In Mr. Harwood, you may recall yesterday, pointed out on the wagering that wagering losses are admittedly deductible as against wagering expenses -- as against wagering gains. Recognizing --
Speaker: But why?
Leonard Sarner: Well, why because the whole object of the Internal Revenue Code is to tax --
Speaker: (Inaudible)
Leonard Sarner: Tax a man's net income. That's right. But still we must -- we still -- presented here with defining the limits as to what expenses can be deducted. And I think that those limits, you can use public policy, you can use legality or illegality not in the sense that the lower court's have used it or not in the sense that the Government is going to urge here as an independent ground for -- as an independent ground for disallowing the deduction, not at all, but to fine in the context of what is proscribed by the State, what do the people in this very industry normally, commonly, frequently find it necessary to do. Now, you take --
Earl Warren: What do you mean by that? Do you mean that they -- they find it normally and necessary for them to violate the law?
Leonard Sarner: Positively. Now, that's -- that's absolutely right.
Earl Warren: What do you -- what do you base that on?
Leonard Sarner: Well, you -- you take our very case, Your Honor. The Tank Truck case involves motor carriers of bulk liquid that is gasoline, kerosene the fuel oils. All the equipment in the taxable year in 1951 was completely standardized by reason of the fact that during the World War II years, there were restrictions on the production of steel and on the making of these tank trucks of the trailer trucks so that a uniform size of tanks, some 4500 to 5000 gallons was the only type of equipment available and the only type of equipment used in the taxable year. The rates of the entire industry are predicated upon the carriage of a minimum of 4500 gallons. Pennsylvania, for reasons of its own, of all the other States with which our industry operated and we represent in this case the -- the substantial -- carriers of the substantial amount of bulk liquids in the Pennsylvania, New Jersey, Delaware, West Virginia, Ohio. Pennsylvania, of all these States had a maximum weight of 4500 gallons. All the other States had some 60000 gallons --
Speaker: Gallons?
Leonard Sarner: Gallons -- six -- to pounds -- pounds, I'm sorry. The weight of the -- of the liquids were, of course, standardized. Whenever our carriers carried anything but gasoline, they were over the weight set in Pennsylvania. So, whenever -- obviously, and we carry gasoline in the summer, some 35% of the times and the winter only 25%. So, between 65% and 75% of the time that we either came into Pennsylvania or left Pennsylvania for one of the other States, we we're violating the Pennsylvania weight limitation law. We knew it, we had to buy. Now, why did we find it necessary? As I say, it was a question could we have increased the rates? The -- we -- I think, the Government can see what the Tax Court found, that if we have particular company, had increased the rates, this would have referred the business to the other carriers, we would have gone out of business, the exact phrase. If the --
Speaker: (Inaudible)
Leonard Sarner: Yes.
Speaker: (Inaudible)
Leonard Sarner: Well --
Speaker: (Inaudible)
Leonard Sarner: Now, -- of course the -- the Lilly case pointed -- answered that argument.I f you recall the Lilly case, it was in our petition, who -- opticians were making kickbacks or facts to physicians. And the argument was that -- well of this optician, this taxpayer had refused to make the kickbacks then he would have -- the business would have been referred to other opticians and the argument was, well, then all of them would have refused. Well, it so happens that an economic reality -- if we had increased the rates, the others would have continued to operate the same and we would have gone out of business. But the answer is just as well for the others. Insofar as the industry is concerned, it was impossible for the industry to keep -- to increase the rates. The rates are so geared to the railroad rates and are so geared to the rates of private carriers, that is the oil companies themselves have private -- have their own fleet of trucks where the -- over the road industry. We don't carry just within -- within a municipality but within a State from one city to another or interstate of course.
William J. Brennan, Jr.: But do the carriers meet the weight requirements.
Leonard Sarner: No, sir. This -- this is -- this -- every the long established, complete practice in Pennsylvania was to fill the load -- the trucks, the capacity to have this 4500 gallons of -- of freight of oil -- of liquid, pardon me. And inevitably, when anything was carried other than gasoline, they were in violation of the weight laws of Pennsylvania. They were completely permissible within the rate set -- within the weight set by the other States.
Felix Frankfurter: I'm (Inaudible). I beg your pardon?
Leonard Sarner: Surely.
Earl Warren: I'm just going to ask you this, can you -- you take the position that you have the right to defy the State of Pennsylvania, to tell them that you will not conform to their laws, that you will drive you trucks in any -- in any way that you desire over their roads and that when you are -- when you are prosecuted and convicted of it, that you can deduct that as a -- as an expense, ordinary business expense.
Leonard Sarner: Well, yes. I mean -- but I, of course, I wouldn't present it in the way that Your Honor did.
Earl Warren: That's just what you're saying.
Leonard Sarner: Well, Your Honor --
Earl Warren: You're saying that you can't and you won't will. And you will (Voice Overlap) by the law.
Leonard Sarner: I say this. Now, I think it's-- I think it's -- it's not to be cast in that way.
Earl Warren: Well, just cast in your own way.
Leonard Sarner: All right. Yes. (Voice Overlap) I -- I think that when a State proscribes certain activity and the weight laws say that we must -- and the industry unquestionably reputable important industry determines that it cannot economically survive under this pros -- proscription of the State. And therefore, it incurs expenses which are unavoidable under its determination that it either has to remain in business or go out of business then for revenue purposes, the Government, the tax laws are not to pay -- double the punish. We paid to find once the -- Justice Burton had asked Mr. Harwood, “Well, aren't you getting the -- the Government to pay part of your -- your fine?” Well, in a sense, yes, but the Government in the sense pays part of every expense. I mean that Government pays part of the salary expense, of the -- of oil expense, we can obtain permits under certain circumstances.
Speaker: But the Congress might be certainly reluctant to pay and fine them to pay.
Leonard Sarner: It might, it very well might. And if Congress so determines, I think then possibly, we would have a different question that is here in Congress.
Felix Frankfurter: Are you saying -- are you saying that so far as moral were concerned, you were just as high-minded, as the high-minded people who violated the (Inaudible) Act and so long as it's on the books, you suffer the consequences of being prosecuted for that delinquency.
Leonard Sarner: That's exactly right.
Felix Frankfurter: But that the ordinary answer is whether or not it is this kind of an expense.
Leonard Sarner: Yeah, that's exactly right.
Earl Warren: And you would carry that then under that theory to any kind of offense that a businessman might commit.
Leonard Sarner: Well, I --
Earl Warren: One -- one moment.
Leonard Sarner: Yes, sir.
Earl Warren: You take the position of we're a high-minded organization and everybody knows that we're moral and so forth in transacting at -- an honorable business and the next minute, you say that you can -- you can defy the law, as the -- as the liquor violators violated. So, would it make any difference to you, whether you are in this legitimate trucking industry or whether you are in -- an underworld activities that there -- that there's not question about the legitimacy --
Leonard Sarner: No. I -- I -- Your Honor, I don't (Voice Overlap) I don't think it makes any difference.
Earl Warren: All right. That's all right.
Leonard Sarner: If you used the -- the concept of ordinary and necessary.
Earl Warren: Yes.
Leonard Sarner: If you used that concept and if you find in this particular industry, in this trade, in this business, it is ordinary and necessary to make these expenditures which are in violation of law or to commit certain activities --
Earl Warren: Yes.
Leonard Sarner: -- for which you are fine then it makes no difference whether this is a legitimate, recognized industry or an illegitimate one or one which is -- which is prohibited.
Earl Warren: And since we take the -- we take the narcotic traffic or the liquor traffic and the -- and if a State has -- has laws -- one State has laws then are -- are more stringent than its neighbors and they used them to -- to stop the narcotic and liquor traffic, you say that because it's necessary to -- to keep up with your competitors and to -- and to do business in an active way in that -- in that State and in order for venture from going out of business that you have the right to defy the laws of that State, pay your -- pay your fines and then claim them as a deduction on the Government.
Leonard Sarner: Yes.
Earl Warren: That's --
Leonard Sarner: That -- that's right. Now --
Felix Frankfurter: Does it -- does it follow because what the Catholic Church called the venial defense -- offense are committed that therefore every venial, every petty violation of law has a moral stigma to it? Does it follow?
Leonard Sarner: No, it does not follow.
Felix Frankfurter: Like on our whole law and all our ethics makes the difference.
Earl Warren: But when you --
Felix Frankfurter: I thought you mean that -- I don't --
Leonard Sarner: No. I -- I will (Voice Overlap). But of course we -- we would take the position. But I -- I think --
Earl Warren: But when you kill about 40,000 people on our highways, largely because of the use of -- of these big trucks on a highway.
Leonard Sarner: That's not so, Your Honor.
Earl Warren: Well that -- but that's the difference of opinion.
Leonard Sarner: Well, it is, but I mean (Voice Overlap) not -- not on the use. You must remember in this particular case, Pennsylvania, of all the States --
Earl Warren: Yes.
Leonard Sarner: -- had -- had a 4500 pound limitation, every other state had 60, Pennsylvania now has 60.
Earl Warren: There are -- some of them now have a hundred and some of them would have 60 in various parts of the country.
Leonard Sarner: Yes, sir.
Earl Warren: And it depends upon the kind of roads that they're able to build.
Leonard Sarner: Right.
Earl Warren: And if -- if they build -- build roads that are -- that will only support 60,000 and the trucking concerns come in and defy the laws of the State and tear them to pieces and carry weights on them that are liable to shift in a manner -- on curves and so forth, in a manner that will -- will take human life, you don't call that hardly that -- an inconsequential thing.
Leonard Sarner: No. I wouldn't call -- I mean if -- if what you say is so, I would not at all call it an inconsequential thing but I would say I don't see where the revenue code has any play in this.
Earl Warren: Well that's -- that's a different thing. That's all I want to know --
Leonard Sarner: That's right. I mean --
Earl Warren: -- in what your position is (Voice Overlap) --
Leonard Sarner: And I think Your Honor, that -- that if the facts as you've exist, as you've indicated, you will not find the trucking industry doing commonly, normally and ordinarily the things which you've mentioned.
Earl Warren: And they don't do that.
Leonard Sarner: They don't do that.
Earl Warren: All -- all the trucking people do not violate the law with impunity.
Leonard Sarner: Absolutely.
Earl Warren: That is -- there are -- there are some who will not hire men -- who will not hire men --
Leonard Sarner: Well, there's no question --
Earl Warren: -- to violate -- to violate the law. And there are others -- there are others who -- who defy the law openly --
Leonard Sarner: Yes.
Earl Warren: -- as you have suggested they have the right to do.
Leonard Sarner: But there's no question. Utah and Pennsylvania, when we had any interstate shipment, we were insofar, we couldn't carry the 4500 pounds and operate at all in Ohio, in Delaware, in New Jersey and make and -- and be in business for - -for a week.
Earl Warren: What do you do -- what do you do between the other States where one has 60,000 --
Leonard Sarner: No. They all --
Earl Warren: -- and the other has 100,000.
Leonard Sarner: They all -- well, we don't -- we didn't run into any of that problem here. Our problem here was that all of the States had an approximate $60,000 weight limit except Pennsylvania.
Felix Frankfurter: And insofar, as a shipment originated in Pennsylvania or Pennsylvania was the destination, it was impossible to comply with the weight law.
Felix Frankfurter: Will you -- I've heard it said but I don't know, what is the authority from saying that this was statewide within Pennsylvania?
Leonard Sarner: Well --
Felix Frankfurter: Statewide infraction.
Leonard Sarner: I -- I think that the -- the -- the Tax Court so found --
Felix Frankfurter: Where is that finding?
Leonard Sarner: And the testimony so indicated, you see, we --
Felix Frankfurter: Well, it's the finding that it was statewide?
Leonard Sarner: A common wide, yes.
Felix Frankfurter: Not that a lot of people did but the fact -- that was in the industry infraction.
Leonard Sarner: Industry in -- in fact, we represented the industry. We actually --
Felix Frankfurter: Who is we?
Leonard Sarner: The Tank Truck in the sense that we are not certificated carriers. We lease our equipment, there were three big carriers in this industry, in the -- in the eastern area --
Felix Frankfurter: So the industry is three?
Leonard Sarner: The -- 85% of the business is carried by three carriers.
Felix Frankfurter: What about the other 15? Is there any evidence in the record?
Leonard Sarner: No. No evidence of the other.
Felix Frankfurter: How long was this -- did I infer from what you said a minute ago that the law has been changed in Pennsylvania.
Leonard Sarner: Yes, 1955.
Felix Frankfurter: And how long was it under the 45,000 or 40,000 --
Leonard Sarner: From 1943.
Felix Frankfurter: From 1943 to 1955?
Leonard Sarner: To 1955.
Felix Frankfurter: I'm going for the appeal but just as a student of legislation. What efforts were made by the industry to (Voice Overlap) --
Leonard Sarner: Every -- that's all in the record. Every two years, a new weight bill was introduced and defeated for purposes of which we -- we think we know but eventually it was passed.
Earl Warren: Would not those things largely determined by the -- the kind of highways that they build in the States --
Leonard Sarner: Oh yes.
Earl Warren: -- and the kind of highways depend upon the amount of money they had and the number of highways they -- they need?
Leonard Sarner: Positively. I mean we're not -- we're not in anyway attacking the wisdom of -- of the Pennsylvania weight legislation.
William O. Douglas: Well, one of your truck drivers is arrested for speeding in one of these trucks, is that the -- did you deduct that?
Leonard Sarner: No.
William O. Douglas: That fine?
Leonard Sarner: We don't pay it.
William O. Douglas: You don't reverse him?
Leonard Sarner: No?
Earl Warren: You don't but do not some truck driver --
Leonard Sarner: Maybe -- maybe they do, yes -- maybe they do. Well, I mean I -- I think it can be answered. I mean, I think, you take the concept of what is ordinary and what is necessary. And if -- and if you find that it is ordinary in -- in this particular industry to speed, then I think -- then I think that the -- that so far as tax purposes are concerned, this is deductible. But Your Honors, I would like to --
Earl Warren: But in -- in the industry -- industry by determining on its own motion, the extent to which it will violate the law can determine for income tax purposes what is ordinary and necessary.
Leonard Sarner: Well, I -- I would -- I would say in -- insofar as we have no limitation set forth in the statute. No regulation, whatsoever, which covers this matter then we're bound by the phrase what is an ordinary and necessary business expenditure and its all common, usual, frequent, necessary to this industry. Your Honors, I like to -- since I just got a few minutes left, I'd like to point out one or two things, the concept of frustration has no bounds, whatsoever, because if you say that to allow the deduction of this fine would frustrate interfere with the policy set forth by the weight limitation laws then even more so, does it interfere with those policies to allow the deduction of the drivers' salaries, to allow the depreciation on the vehicles, to allow us to deduct any expenditure involved in the operation of this business. And that of course comes to the position that former Attorney Brown now had taken when he addressed the American Bar Association to a position which the Government in the petition for certiorari was reaching to take but would say refraining from in this brief. And that is that whenever you have an illegal business or whenever you have say a transgression of a legal business, you attack the entire gross income, not the net income because to allow any expenditure, any expenditure as a deduction for tax purposes, allows this activity to continue in existence. And therefore, if you want to use the Revenue Law to enforce these state laws, then disallow all expenses whatsoever. And I think, Your Honors, it's very important to note that not only is there nothing in the code but there is nothing in the regulations at all to cover this matter. But the regulations do have a penalty provision. At the time this doctrine was being evolved in the courts about frustrating public policy, the -- one of the circuits decided the case that penalty payments paid for violation of federal income tax laws such as the fraud payment, or the negligence or the delinquency payments were not deductible as necessary in ordinary business expense though they thought there might be some doubt about it. And thereafter, the treasury incorporated in the regulations, this penalty provision and it is limited to penalty payments made in connection with violation of the federal income tax law. Now, of course that's a totally different problem. We don't deny that Congress on one hand can make a determination and therefore, in order to aid in the enforcement of its own laws, can deny income tax recognition to a lot of things. But that's not our problem, our problem is, are we to take an absolute determination by the State. Pennsylvania has a blue law which is now sought to be enforced. And the Commissioner of the Seventh Circuit in the Doyle case pointed this out, insofar as of -- some of Pennsylvania dealers may now sell on Sundays, in violation of the Pennsylvania law which has been on the books for 200 years and which has been always violated, are they not to be allowed their normal, usual, common expenses of operating on a Sunday whereas in other States, this activity is permitted and there's no question and it --
Charles E. Whittaker: (Inaudible)
Leonard Sarner: No -- no. And -- and the Government maybe not in this particular case, but in the arguments before the -- in the argument before the lower courts and a variety of cases, sees no difference, whatsoever, in that situation.
Charles E. Whittaker: (Inaudible)
Leonard Sarner: Yes.
Charles E. Whittaker: (Inaudible)
Leonard Sarner: Yes.
Charles E. Whittaker: (Inaudible)
Leonard Sarner: There -- there is no basis for that, Your Honor. And that at the -- at some fines were allowed insofar as the penalty payment is made to the Government for an innocent violation, they allow the deduction to be taken. The Government in those cases has lost but has argued that there is no difference, whatsoever, between the cost of good soul to allow the taxpayer to deduct the illegal payment enforced to goods or to deduct illegal penalty payments. They'd argued. They lost those cases and I think that you will see, Your Honors, that insofar as this matter has evolved in the Courts, there is no pattern whatsoever. And hence, what we must do is to limit ourselves to the concept of ordinary and necessary within the framework of the decision of the Court.
Earl Warren: Mr. Solicitor General.
J. Lee Rankin: Mr. Chief Justice, may it please the Court. The issue in this case is what ordinary and necessary means and it's the position of the Government that this Court should not put its stamp of approval upon allowing the deduction under the guise or theory of ordinary or -- and necessary, the various charges that a law breaker incurs in running his business. Now, the effect of such an action is obvious, if you will follow me regarding the economics of the situation, we are not for a moment saying that Federal Government should take upon itself the of enforcing all of the state laws of this country. It has enough of a problem as it is, but we are saying that this Court should not approve in anyway or intrude upon the sound decisions of the lower court where they say that you can't violate the laws of the Federal Government of the State. And then charge off, to the extent of that federal tax, the cost of that violation and thereby frustrate or reduce the penalty conceived by the States and deplete the enforcement of their laws. Now that's the issue. In this case of the Tank Truck Company, they entered upon a deliberate plan over a term of years to violate the laws of the State of Pennsylvania. And they want the United States Government and in the end result, the rest of the taxpayers of this country to pay that bill.
Speaker: What about the preceding case where you haven't got that on it?
J. Lee Rankin: The preceding case, we do not have a willful violation. The Court did not make a finding but the Government's willing to concede that there was not a willful violation. We do not concede that there were not ways that they could avoid if they want to pay the price. Now, the problem you have in the preceding case is that there is about $28,000 of fines and these laws are not just made to protect the roads or to get enough money so the State can replace the road that a truck breaks down because it violates these laws. They're made for two reasons, that's one of them. The other reason is to protect the life and safety of the people who travel on those roads and the courts have so held constantly. And the Court of Pennsylvania and Third -- Third Circuit, another case is upheld explicitly that that's the purpose of these laws. Now, when you take a truck and you overload one of the assets, there isn't any question of what you're going to keep pounding and pounding on that part of the truck and do greater damage than if you spread that load. And that's the reason for that particular provision of the law. They say that they're so busy picking up different packages from over the country side --
William O. Douglas: 318.
J. Lee Rankin: That they can't take and use a scale on those packages. They just take the weight of the man that wants to put a -- any kind of waste that he may have taken in good faith, maybe the good out proper care and toss it in the truck and proceeded. And that's one of the reasons that's been given by counsel and it's shown in the record for they're having overweight on the one act in violation of this law. Another is that their weight shifts, during the shift over the roads and they say that can't be avoided. Now, if the space were large enough so that it would cut in to their net property in a very substantial way and they could use -- they could see that they might save it. Don't you think they could put a scale off in the countryside and take a couple of minutes to weigh it and see that they didn't violate this law or don't you think they could have a compartment or several compartments in their truck or ways of holding this merchandise so it wouldn't shift? If it involved enough money in the trucking business in the way of fines, so it was worthwhile? But the first petitioner comes here with a $6 million annual business and his total fines for the three years, $28,000. Now, I think if you will just consider that for a moment.
Hugo L. Black: Which one was that?
J. Lee Rankin: That is the Hoover.
William O. Douglas: (Inaudible)
J. Lee Rankin: You will agree with me that they just sat down and figured out on their gross and on their net what amount $28,000 was to a $6 million gross take and whether or not it was worth the cost of trying to comply with this law. And if you cut that in half like we do in the corporation laws by approving that kind of conduct, you will find that none of the laws will be evaded in regard of the things of that character.
Felix Frankfurter: You don't or do you -- perhaps I'm anticipating, so don't bother to answer if I ask. You do not make a distinction then when you say none of the laws? Can you make a distinction between any regulatory measures, whether they're potentially dangerous to life or whether they are in the opinion of the legislature desirable for some other public policy of the State? All we ask of this case to draw a line between deductibility of so-called fines which the State for whatever reason of policy it may choose to put things on the statute books as made the formulated conduct against public policy of the State.
J. Lee Rankin: Well, the lower courts have drawn this kind of a line and I think the O.P.A.cases demonstrate it and I think there's some sense to it. When the charge, the O.P.A.cases are civil cases, when the charge is in the nature of compensation to try to make up for the extent that's involved to the State or to the individual, they have not treated and the Court's have not treated as far as deduction is concerned on the same basis as they have when it's in the nature of the penalty to (Voice Overlap) --
Felix Frankfurter: You mean administrative expenses for recording things or things like that?
J. Lee Rankin: Or to replenish something that would be destroyed or something of that character.
Felix Frankfurter: You know -- you know at least, as well as I do that there's a few things more difficult to determine than when a so-called revenue measure is for purposes of money or for purposes of -- of some other purpose, some derivative so-called free-power purpose.
J. Lee Rankin: Yes, but they do --
Felix Frankfurter: They didn't -- who is to determine that, the Commissioner each time?
J. Lee Rankin: Well, no. It appears clearly in the O.P.A. If you recall in the early days of the O.P.A.in the Rossman case period, the administrator interpreted to the law that if there was treble damages involved, that was a penalty, that was because there was a willful violation that was found and they were trying to stop other people from willful violations and including this person and they therefore, the Courts have held, you can't deduct that as an ordinary and necessary expense. But if the single amount was involved, they said you could because that was only an element of the Government trying to recover an unjust enrichment of the tax -- taxpayer involved.
Felix Frankfurter: Take -- take narcotic cases, because they have been mentioned where drug stores, where an owner may be as innocent as you are and he has to pay a heavy fine or may even go to jail. Now, is that deductible?
J. Lee Rankin: Well --
Felix Frankfurter: Maybe as innocent as a newborn baby and under the law, that innocent is a material so far as that's concerned.
J. Lee Rankin: If the law itself does not recognize the distinction between willfulness or non-willfulness, is the position of the Government that it's the legislature that that question should be addressed to it if you want to have some relief. But oftentimes, the legislature does not want to permit, (a) to go out and say, “I don't care what happens, I'm going to run my business in such a way that whether I'm abiding by the law or not abiding by it, whether I'm innocent or not, it doesn't make any difference to me, I'm not going to try.” And so the legislature says whether you're innocent, willful or not willful, you pay the fine. And I think in the legislative judgment, they're trying to handle it in that manner with the idea if it will be determined. And the moment that you give the benefit of the tax deduction which in corporations it's 52% today and it's a much more important element with it -- with that much involved than it was in the earlier days when the tax was much less. But if you take that much out of this determined, you take 50% out of it and it just becomes an attractive thing which does from amongst dollar and cents proposition.
Tom C. Clark: What did you say the -- in the second case of Pennsylvania instead of setting this up as a fine and set it up as a road toll and made every -- every truck to pay this amount before he go on the road.
J. Lee Rankin: Well, that was the -- the contention that has been argued by counsel in their brief to some extent and the courts have treated it differently if it was only a road toll. And the Commissioner, in his first ruling was referred to by counsel, treated it as though it was a road toll. And then when he revived and reversed that ruling in 1950, December, he said that the -- he‘s been an error -- the Commission had been in error in assuming that it was just a toll because he had assumed that there could be a permit obtained for the larger amount and that wasn't true. And the purpose of it was to determine to penalize and therefore, there should be no deductions and that was the expressed ruling. I think there's an entirely different situation in the nature of the toll. But let me demonstrate to you, what would happen in this case if it was a toll. These people have 77,000 trips in this one year tax -- taxable year, 77,000 trips. How many times would they pay a fine? 711. Now, they conceived that 60% of the time in the summer they were overweight in violation and 75% of the time in the winter. Now, just take the 60% figure and you got somewhere around 42,000 to 45,000 times that they made trips that they were in violation knowing every mile that they traverse to the State they were in violation of the law and they paid fines the times they got caught, 711.
Charles E. Whittaker: Mr. Solicitor, were these the fixed amounts of fine for a particular violation?
J. Lee Rankin: Yes, it's graduated if it's higher but it isn't very large. And there were no imprisonments imposed on them and they even made a contract with their employees, labor contract whereby they would agree to pay these fines that were not imposed on the company but were imposed upon the employees that drove the trucks.
Felix Frankfurter: When you say no prison fine was imposed, does the statute permits prison fines?
J. Lee Rankin: No. Not -- no, it did not, so that you see if you talk about tolls, these people weren't paying any kind of toll, they paid on such occasions as they got caught.
Tom C. Clark: And that toll would be aimed at the revenue for the purposes of (Inaudible)
J. Lee Rankin: That's right.
Tom C. Clark: And you say that your contention is that this is aimed to traffic safety.
J. Lee Rankin: Both. The -- the maintenance and protection of the roads and the Courts of Pennsylvania and that Third Circuit which we think this Court would respect and follow have both held that those were the two elements that this -- these particular laws of Pennsylvania were addressed to. And that was the purpose of it and they were not for the purpose of just recovering whatever was necessary for the maintenance of the roads.
Tom C. Clark: But the shifting of a --
J. Lee Rankin: Yes, sir. I know that.
Tom C. Clark: As I understand Hoover, it's not (Inaudible) is that right?
J. Lee Rankin: I would consider that that hasn't effect on maintenance and safety both.
Tom C. Clark: Hoover, when it's not the gasoline --
J. Lee Rankin: No.
Tom C. Clark: Would the shifting of the packages that they pick up didn't have any effect as the record show or do you know on the safety, the records of driving where it makes -- the truck may swerve?
J. Lee Rankin: The record doesn't show. I would argue my -- in my own experience that that makes it more difficult to keep the truck properly on the road and the -- that it was more of a hazard to anybody driving near it and including the driver himself but that's just my own experience and it maybe wrong, I'm not --
Earl Warren: The load shifts to one side and -- and you go around the curve, it has a -- it has a very distinct effect on the equilibrium of the truck, wouldn't it?
J. Lee Rankin: That's what I think and there's no question in the Tank Truck case, that its -- the evidence shows that if the oil was not filled to capacity in that truck that the shifting of that kind of a load would clearly be a -- a hazard to the truck and anybody near it. And I would think that the mere fact it was a package instead of oil would no -- make no difference from the physics of the matter. Now, this Court has not passed squarely from this question but in several cases, it has come up to the proposition and certainly to the Government indicated that it would not tolerate the deduction which would frustrate a public policy if it was sharply defined. Now, the Lilly case, the Court was very explicit to state in that case that the reason they allowed the deductions for the payments to the doctrine in connection with these eyeglasses was because there was no declaration, either Federal or State of any sharply defined policies. And the Court very carefully said that it was not in any way approving this practice which had been condemned by the industry by that time and was reflected on and so forth. But the Court found that at the time involved in the deductions, there had become no sharply defined policy. Now, the Government's position is not that any policy that seems to be unattractive should be the basis for this action. We're talking on the thing that's involved in this cases is a sharply defined policy as declared by a state or federal legislature where anybody concede and there isn't any question in these cases but what this very parties knew what the law was and the Tank Truck started out to deliberately violate it and the other people didn't seem to care enough to take the steps at the cause that it would have been to in order to comply with the law.
Speaker: On that point, are the findings of the Court different -- in the different cases?
J. Lee Rankin: The Court in the Hoover case did not find whether it was willful or non-willful. But it said that it -- it -- in its opinion, it would make no difference so it made no finding on that question. In the Tank Truck, it was admitted by everybody. It was deliberate and purposely done because it was conceived that that's the only way they could conduct their business and stay in business. And on that point, it seems to me that the Court has to face up to the proposition that if this kind of a deduction is allowed, businessmen can come to this Court and say we -- we had to violate this law or we -- it was attracted to violate this law and they're certain, you can take, go down the statute books either Federal or State. And you can find dozens of laws that businessmen can make a lot more money if there can be free to violate and charge the expense to somebody else. And they wind up in this kind of operation with the general taxpayers of this country having to make it up. Now, we're talking about the -- in these cases a substantial amount of money in taxes but if you'll look at in the brief, you'll see the record as to what defines for violation of this maximum truck laws were in the State of Pennsylvania during this period of this year. And you'll find that that was over a million dollars. Now, if this can be approved for the Tank Truck people, certainly, all businessmen that had any kind of a profit would be entitled of the same deduction in the trucking business which would mean in prosperous times like we've had that such a rule would take a million -- $200,000 cut it in half and you transfer that load under the -- under the other taxpayers in the country. That's the only place that you can do -- get it because it has to be made up to carry the Government. Now that -- the courts over a number of years have taken the position that they just would not approve a course of action which frustrated a public policy that was clearly defined. And the problem has been what it was clearly defined and they have initiated and taken that action and as a matter of law, it isn't only a matter of regulation.
Felix Frankfurter: May I ask you, Mr. Solicitor? How many cases in the Court of Appeals there have been -- which have not yet come to this Court if any, supporting the position that you're urging and were they all unanimous and over what period of time did this judicial construction prevail? Because I for one, take great regard to construction of dubious -- of a phrase, general terms is about which you can argue abstract until the (Inaudible) so far as I'm concerned, I pay a great deal of attention to unanimity of judgment by Court of Appeals over the years.
J. Lee Rankin: I can't answer the question about the number of Courts of Appeals. The only other one that I recall offhand is Judge Hand's decision that's been referred to here, which -- in which he clearly recognized the principle and said it was a question of ad hoc consideration in each case and dealt with the proposition in that case of being a single amount, not treble damage as being compensatory and therefore outside of the ordinary rule.
Felix Frankfurter: Well, is it -- if I understood counsel, this -- the Pennsylvania -- what is it? 40,000 pounds rule whatever it was.
J. Lee Rankin: Yes.
Felix Frankfurter: Was enforced until 55 or more than -- for about a decade of their regard. And therefore, it bears on the argument that this was net -- an industry wide persistent, more or less inevitable. That's the argument, cause of conduct and hasn't it come up all through that either before the Treasury or somewhere?
J. Lee Rankin: Well, you have a problem in that period in regard to the war period and there was a period of time when there was such restrictions on the kind of trucks that you could get, trailers that the difficulty with compliance was recognized by the State during the Court --
Felix Frankfurter: That brings us on the 1945.
J. Lee Rankin: That's right.
Felix Frankfurter: Well, that still leaves a decade nearly, between 1945 and 1955.
J. Lee Rankin: Well, we're dealing with 51 here. And the change by the Commissioner was at the close of 1950 when there wasn't any question of what they could have got at that time equipment to comply with the law. So at that period, there was a different situation. Now, up to 1950, you see, you had the Commissioner's ruling that would permit them to have it and the moment after the ruling was reversed, we have this case in 1951 that squarely deals with it. And the Court of Appeals of the Third Circuit had no difficulty and the Sixth Circuit had no difficulty holding against the petitioner's in both of these cases.
Felix Frankfurter: Would the Hand rule require that each particular case, and I'm not merely referring to this kind of a fine because this is a far reaching problem that you're presenting, was the -- would the Hand rule require for the Commissioner, the respective Commissioners in the various districts, to pass on the set of circumstances? I'm inquiring. I draw no inference from it. I just want know what -- what you think we're doing here?
J. Lee Rankin: I don't think that the Hand rule would involve that kind of a problem. I think, if the Commissioner would find that it was a -- a fine in the nature of a penalty, either under state or federal law that to allow the deduction would not be ordinary and necessary.
Felix Frankfurter: And the taxpayer would have to make a l -- but could the taxpayer come -- come in within under the Hand rule and say this is inadvertence, I give strict orders to my employees not to do this, et cetera, et cetera.
J. Lee Rankin: Well, there's nothing in the Hand's opinion that I see that would indicate any recognition if there was a fine or penalty that the legislature imposed as determined that you would disregard that and allow it to be deducted.
Felix Frankfurter: If it -- if the fine was imposed within -- for the tax people used there to go behind what the State has found.
J. Lee Rankin: No. Now if this --
Felix Frankfurter: I understand that, all right.
J. Lee Rankin: -- if this fine, there's something wrong with it, if you can't run your business and comply with the requirements of the law, it seems to me there -- that question should be addressed either to the legislature or the court where you get the fine if it's a violation of due process because it's impossible to run a business and comply with the law or some other legal interference with it being valid. The proper place is to raise it in that Court and try to establish that it's not a valid fine or statute. But that isn't the case here. They didn't raise that at all, they just proceed to pay it. And they made a deal with their employees in the Tank Trucks but they had paid their fines for them to take care of it.
Speaker: How many Circuits are there on each side of this conflict?
J. Lee Rankin: There are two with the Government and one against. The next case involved the Seventh Circuit that is against. There are great many lower courts and I think that when Justice Holmes in the Sullivan case said that there'd be time enough to deal with this problem when the taxpayer had them to merit it and bring it before the courts that each cared of a good many -- that might have been here earlier. It seems to me it was pretty clear what he thought at least, whether the whole Court felt that or not of such a contention but --
Speaker: (Inaudible)
J. Lee Rankin: I beg your pardon? I'm sorry.
Speaker: (Inaudible)
J. Lee Rankin: Yes. That's the next case.
Speaker: (Inaudible)
J. Lee Rankin: That's right and the wages for recording (Inaudible).
Speaker: (Inaudible)
J. Lee Rankin: Mr. Justice --
Charles E. Whittaker: (Inaudible)
J. Lee Rankin: No. I think that there -- it's a different problem. But we think that they're both governed by the same general rule but the Court could consider that as different case.
Speaker: (Inaudible)
J. Lee Rankin: No, that involves payments that were in direct violation of the statute to induce the Commission of -- of crimes. That's the issue there. We think that's more aggravated than these that are incidental in the nature of fines and penalties. But even in the Seventh Circuit -- the Seventh Circuit referred to fines and penalties and said those are concomitant expenses and those, of course, would not be deducted. So that to that extent on this kind of a case, apparently the Seventh Circuit would agree, that these particular charges were not deductible in any event because they expressly referred to fines and penalties as being concomitant expenses and not as they call it, the integral expenses.
Charles E. Whittaker: You raised any question, Mr. Solicitor, about the standing of petitioner to sue in Number 109 and that the tax was not imposed by Pennsylvania upon him that one he voluntarily assumed by contract?
J. Lee Rankin: We refer to that in the brief and we said -- say that, of course, if they're not his expenses, they're his not ordinary and necessary expenses.
Charles E. Whittaker: I was a little surprise frankly, for -- to hear you emphasize the modifying words of ordinary and necessary rather than the real subject, it seems to me, business expenses. Now, how far -- is it not true that in last analysis it must be a business expense of these words ordinary and usual, merely qualified business expense?
J. Lee Rankin: That's true. The -- it's a question of whether or not you recognize this agreement as creating it and causing it to be a business expense of this particular taxpayer. Then if you do find that fact, however, you still have to find that it's ordinary and necessary.
Charles E. Whittaker: First of all, you got to get business.
J. Lee Rankin: That's right.
Charles E. Whittaker: Now then how can he find -- well, for violating a law be of business expense.
J. Lee Rankin: Well, that's a question of whether this Court is going to recognize that it's the business expense for men to violate the law and pay fines for it in the conduct of business in this country. Now, that's the issue that's put up to this Court.
Felix Frankfurter: But may -- do the business expense mean anything more than an expense incurred in the course of the conduct of your business. If we're going to go in chopping up a business into -- or turn the business into all sorts of implications that the words do not ordinarily carry anybody and common usually, we think that if money put out in relation to the conduct of your business, is a business expense. And that's why the qualifying words are so important.
J. Lee Rankin: Well oftentimes or usually, the Court has dealt with this under the ordinary and necessary language as to whether or not that was -- as to that being controlling. It's the Government's position that it is not ordinary and necessary for men to violate the law in this country and that therefore, since they don't come within that qualification of the statute, they're not entitled to the deduction and the grant from the -- the deduction would be to interfere with the enforcement of the state laws and make it very difficult to apply them and have them effective.
William O. Douglas: (Inaudible)
J. Lee Rankin: The courts have generally held that extortion payments, as well as bribes, lobbying expense and all payments of that character were not deductible but they are not ordinary and necessary to business and the Court just wouldn't recognize it as such.
Tom C. Clark: Suppose the facts showed beyond dispute that the man was in the gambling business, can the Government tax him? The facts showed beyond dispute that he's in the gambling business (Inaudible) because he was paying not so much for equal protection. You might get around that on something but could you get around it on the basis that it wasn't an ordinary and necessary expense of his gambling business which the Government taxed.
J. Lee Rankin: Well, the courts have said that no matter how much he said, I can't run my business and actually, this Court dealt with that very problem in the Textile Mills case because if you will recall that case with the question of lobbying to try to get the return of the alien property. And the corporation undertook to try to lobby that through the Congress and the question was whether or not under 23 (a), they could deduct the amount of money that they paid to a publicist and two lawyers. Now, their contract provided they would lobby this very thing through Congress and they got it done. And certainly, it was ordinary and necessary and it was an integral part of what they were trying to do under their contract, to try to get that legislation through and the only way they could do it is by using such personnel. And this Court said that would frustrate the policy to permit anything of that character.
Tom C. Clark: That's different to saying it was not an ordinary and necessary business expense, isn't it?
J. Lee Rankin: No, because you put a gloss on ordinary and necessary in that situation. The Court says, “We will not recognize the idea that it's ordinary and necessary to frustrate the laws of the United States or the States.”
Tom C. Clark: Even though it's a fact.
J. Lee Rankin: That's right.
Felix Frankfurter: What is -- what might the political assessment -- judge's political assessment shared on this problem?
J. Lee Rankin: I don't believe I understand the question.
Felix Frankfurter: We have a case here, didn't we? In which we have to determine whether judges -- whether a political assessment imposed upon a fellow who's running for a judgeship was a deductible ordinary and necessary expense (Inaudible)?
J. Lee Rankin: Yes.
Felix Frankfurter: Now, what -- what about that? There's considerable division of opinion on -- in the Court on. What lied to that shed that was running for officers -- becoming a judge isn't a business but certainly is for purposes to tax an income. Isn't it?
J. Lee Rankin: Well --
Felix Frankfurter: We have not -- we held it non-deductible.
J. Lee Rankin: Yes.
Felix Frankfurter: The Court did.
William O. Douglas: And if you'll get to the point on disallowing (Inaudible)
J. Lee Rankin: I'd like to deal with that in the next case if I may, Mr. Justice.
William O. Douglas: Yes.
Speaker: In the judges case to which reference has been made was not decided (Inaudible). As I recall it, the basis of it was -- that it was -- nobody could suppose under any circumstances that a man would put his practice of law and accepted a job as judge with the agreement to run -- run for it, that it was an ordinary and necessary business expense for him to pay the assessment which was laid on him in order to get the privilege of running. And who did hold there, they didn't follow the Tax Court which held that it was impossible to conceive in this country that any judge had ever held that position who's at all influenced by the desire to get the salary.
Felix Frankfurter: [Laughter] Wonderful conclusion.
Earl Warren: Yes. Mr. Harwood.
Judson Harwood: I was handed a note that Mr. Sarner used my time. I didn't know he was using my time. I saved some from yesterday -- it was -- could I have my five minutes?
Earl Warren: Well, now if it's within your time, you can, if it isn't, well you cannot because we have --
Judson Harwood: Well, I haven't used 25 minutes. I was charged --
Earl Warren: I don't keep track of the time. Your time has expired, I'm sorry. We'll have to take it from your brief because we have people from out of town who were waiting to be heard.
Judson Harwood: Well, the reason I asked the question --
Earl Warren: Yes.
Judson Harwood: -- I didn't used time and I didn't know someone else was using my time.
Earl Warren: Yes.Well, I didn't either.