Commissioner v. Sullivan

Holding

Rent and wage payments by an illegal gambling business are ordinary and necessary business expenses deductible under Section 162.

Facts

Sullivan operated an illegal bookmaking business and deducted rent and employee wages.

Reasoning

Justice Douglas held that the federal tax law does not penalize illegal businesses by disallowing routine business deductions, absent specific public-policy disallowance. The decision distinguishes routine expenses from payments that violate clear federal or state policy.