It is a fact of life that many companies make dubious payments in order to get business. The line between legitimate business expenses and commercial bribery can be a fine one, and while businessmen who are prosecuted for having crossed that line are rightfully most concerned with the loss of liberty and stigma associated with a criminal conviction, lawyers and accountants representing them need to be mindful of the tax consequences of their clients’ conduct.
The Internal Revenue Code allows companies to deduct expenses that are ordinary and necessary to the operation or maintenance of a business, unless they were illegal bribes or kickback payments. See 26 U.S.C. §§162(a), (c)(2). However, not all payments made to obtain business are illegal bribes and the deductibility of payments will turn first on whether they were ordinary and necessary given the specific industry at issue, and second on whether they were illegal under the applicable state or federal law.
Ordinary and Necessary
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
