Court Opinion

ID: 4481825
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:07.614459+00
Date Added: 2024-06-11T07:57:58.133880
License: Public Domain

SimpsoN, J., dissenting: Although I respect the majority’s attempt to reconcile the decisions in Primuth and McDonald, I am not convinced; in my opinion, Mr. Carey’s expenses of seeking reelection should be deductible. In general, I agree with the views of Judge Sterrett, but I would like to add the following comments. To me, it is indisputable that the expenses of seeking reelection were incurred by Mr. Carey in his business; they were reasonable in amount and were incurred in an unsucessful attempt to remain as president of the union. Since he was unsuccessful, they should all be deductible in the year when paid, and we need not consider whether, if he had been successful, they should all be deductible in a single year or should be charged off over the term of his office. If a deduction for these business expenses is to be disallowed, it must be done on the basis that it is contrary to public policy to allow a deduction for such expenses. In Commissioner v. Tellier, 383 U.S. 687, 694 (1966), the Supreme Court reiterated the long-standing rule when it said, “Only where the allowance of a deduction would ‘frustrate sharply defined national or state policies proscribing particular types of conduct’ have we upheld its disallowance.” When a payment is contrary to law, such as a bribe or a kickback, to allow a deduction for such payment would clearly frustrate the policy which makes the payment illegal. Similarly, to allow a deduction for a fine or penalty would have the effect of mitigating the penalty and thereby undermine the law which provided the penalty. However, when we were faced with the question of the deductibility of payments in settlement of a claim for compensatory and punitive damages under the “False Claims Act,” we held, in effect, that it was for the Congress, not the courts, to decide whether a deduction should be disallowed on the basis of public policy. Grossman & Sons, Inc., 48 T.C. 15 (1967). When Congress recently amended section 162 to provide that certain punitive damages were not deductible, it also included in the statute the rulings that certain other payments were not deductible because they were contrary to public policy. Sec. 902, Tax Reform Act of 1969. At that time, the report of the Senate Finance Committee included the statement that: The provision for the denial of the deduction for payments in these situations which are deemed to violate public policy is intended to be all inclusive. Public policy, in other circumstances, generally is not sufficiently clearly defined to justify the disallowance of deductions. * * * [S. Kept. No. 01-052, 01st Cong., 1st Sess., p. 274 (1969), 1960-3 C.B. 423.] The committee apparently felt that it was for Congress to decide when deductions should be denied for reasons of public policy, and I generally agree. It is true that Congress has undertaken to regulate the conduct of union elections, but in those provisions, I see nothing indicating that the expenses of conducting an election should not be deductible for tax purposes. Clearly, anyone who seeks election to a union office is likely to incur expenses, and the payment of such expenses is surely not illegal. On the contrary, anyone who stands for such an office must present himself and his views for the consideration of the members of the union, and to do so is altogether ¿misistent with our democratic traditions. If there is any risk that some candidates might engage in undue campaigning and incur excessive expenses in an attempt to secure union office, it seems to me that the appropriate remedy is not to disallow a deduction for all such expenses. So far, Congress has manifested no concern over such possibilities, but if it does become concerned, it can fashion a far more suitable remedy. As a court, we have a responsibility to implement the general indi-cies declared by the Congress, but here we have no policy declared by Congress. The majority of the Court has decided, for reasons of public policy, to deny a deduction for the expenses of seeking a union office. I consider that a policy question which should bo decided by the elected members of the Congress. Fay, DawsoN, and Steeeett, //., agree with this dissent.