National Brass Works, Inc. v. Commissioner of Internal Revenue

In its income tax return for the year 1944, National Brass Works, Incorporated, petitioner herein, claimed and deducted from its gross income as an ordinary and necessary business expense an amount equal to the sum paid the government on July 17, 1944, “in settlement of the [Office of Price Administration] Administrator’s claim for treble damages on account of violations of ceiling prices for non-ferrous castings under [Revised Maximum Price Regulations] RMPR 125.” The Commissioner of Internal Revenue disallowed the claim and determined a deficiency in petitioner’s income tax for the year 1944 in the sum of $2,911.85. Petitioner applied for a redetermination of the deficiency and the Tax Court sustained the Commissioner upon the submitted stipulated facts. Petitioner then sought and obtained review in this court.

In the .opinion filed by this court remanding the case for further proceedings, we said that a payment to be held as an ordinary and necessary business expense must “not frustrate the purposes of a statute or violate-public policy”, must not be a “fine in a criminal case”, and must not be a “forfeiture in a case where it has been proven that the forfeited article has…