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If I operate an illegal enterprise, are the business expenses still tax deductible?

If I operate an illegal enterprise, are the business expenses still tax deductible? Topic: Sullivan case supreme court
June 16, 2019 / By Betsy
Question: This is an entirely serious question. Let's say I operate an illegal enterprise, such as a meth laboratory or an illegal gambling operation. Does the law allow me deduct those Update : I appreciate the responses, but could someone support their positions
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Best Answers: If I operate an illegal enterprise, are the business expenses still tax deductible?

Agnus Agnus | 6 days ago
The answer may be surprising to many people, but in most cases the business expenses of an illegal business are tax deductible, just as they would be in a legitimate business. As Senator John Williams, the orchestrator of the income tax bill, stated: “the object of this bill is to tax a man’s net income…the law does not care where he got it from, so far as the tax is concerned." There have been many federal cases addressing this very issue. In fact, in a series of decisions, the Supreme Court held that there is no public policy exception to § 162 deductions at common law. Without clear guidance from Congress as to the relevance of the legality of a business activity in the expense deduction determination, expenditures of a taxpayer that otherwise meet the requirements of § 162 will be allowed as deductions. There are some public policy exceptions, such as the bribes and kickbacks you spoke of, but again, they are the exceptions, rather than the rule. Check out Commissioner v. Sullivan, a 1958 Supreme Court case: And for a general background on the issue with case references, see the following link: However, I would also point out that in contrast to another opinion offered above, I am not aware of any law or restriction that would prevent the IRS from "outing" you if you decide to report the income and business expenses to the IRS, such as on a Schedule C. If you comply with the tax laws, the IRS could turn your information over to the DEA, for example, if your business involved the sale of illegal drugs. To my knowledge, unless you have specific information to the contrary, the IRS would not be bound by any confidentiality requirements with respect to sharing your tax information with other governent agencies where criminal acts are involved. Thus, your property could be seized and you could be subject to other criminal actions, so that taxes would be the least of your concerns..***:D
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Agnus Originally Answered: If I operate an illegal enterprise, are the business expenses still tax deductible?
The answer may be surprising to many people, but in most cases the business expenses of an illegal business are tax deductible, just as they would be in a legitimate business. As Senator John Williams, the orchestrator of the income tax bill, stated: “the object of this bill is to tax a man’s net income…the law does not care where he got it from, so far as the tax is concerned." There have been many federal cases addressing this very issue. In fact, in a series of decisions, the Supreme Court held that there is no public policy exception to § 162 deductions at common law. Without clear guidance from Congress as to the relevance of the legality of a business activity in the expense deduction determination, expenditures of a taxpayer that otherwise meet the requirements of § 162 will be allowed as deductions. There are some public policy exceptions, such as the bribes and kickbacks you spoke of, but again, they are the exceptions, rather than the rule. Check out Commissioner v. Sullivan, a 1958 Supreme Court case: And for a general background on the issue with case references, see the following link: However, I would also point out that in contrast to another opinion offered above, I am not aware of any law or restriction that would prevent the IRS from "outing" you if you decide to report the income and business expenses to the IRS, such as on a Schedule C. If you comply with the tax laws, the IRS could turn your information over to the DEA, for example, if your business involved the sale of illegal drugs. To my knowledge, unless you have specific information to the contrary, the IRS would not be bound by any confidentiality requirements with respect to sharing your tax information with other governent agencies where criminal acts are involved. Thus, your property could be seized and you could be subject to other criminal actions, so that taxes would be the least of your concerns..***:D
Agnus Originally Answered: If I operate an illegal enterprise, are the business expenses still tax deductible?
This is actually a consideration in Colorado. They recently allowed retail sales of marijuana. Owners of the businesses are suing the state to try to get out of collecting sales tax. They say that since selling is illegal from the federal point of view they should not have to collect tax.

Timo Timo
This is actually a consideration in Colorado. They recently allowed retail sales of marijuana. Owners of the businesses are suing the state to try to get out of collecting sales tax. They say that since selling is illegal from the federal point of view they should not have to collect tax.
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Timo Originally Answered: How Can i report my employer for hiring illegal immigrants and knows they are illegal?
Well, CAN you tell the difference effectively and are you sure they are KNOWINGLY hiring illegals? I had problems when I came to the US finding work because most people don't even know what a work visa looks like. So I joined the army, who sponsored my citizenship, sparing me many thousands of dollars. So DO be sure or you'll just lose your own job for having your entire operation disrupted for an entire day while ICE digs around your paperwork. However IF you are ABSOLUTELY CERTAIN they are willfully and knowingly hiring illegals, call ICE - Immigration and Customs Enforcement. They are in your local phone book under "government".
Timo Originally Answered: How Can i report my employer for hiring illegal immigrants and knows they are illegal?
To report suspicious activity, call ICE toll-free at 1-866-DHS-2ICE. or look up online http://www.ice.gov/contact/

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