AbstractMay courts legitimately impose their public policy views to override statutory commands? This article focuses on some of these problems in the field of federal income tax. Part I of the article focuses on theft losses suffered by confidence-scheme victims who thought they would profit from counterfeiting or other illegal activity. Courts usually disallow these deductions so as to discourage illegal activity. This article criticizes this rationale and offers a better one. It suggests that a tax deduction would be contrary to state policy in those situations where states in effect penalize victims by denying them restitution from the thieves. Part II discusses the cases that have denied deductions for fines and civil penalties and explores how these apply to the denial of restitution. Part III assesses the wisdom of disallowing deductions in these cases and suggests that it would make more sense for society to punish the wrongdoer solely in the criminal courts and to allow the would-be counterfeiter a theft loss deduction.
SubjectsFederal income tax, Theft loss deduction, Restitution, Public policy
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