Adolf Meller Co. v. United States

This tax refund case comes before the court on the parties’ cross-motions for judgment on the pleadings. The parties agree that the decision hinges on the validity of Treas Reg. § 1.162-21(b)(l)(iii), which provides, in substance, that no deduction shall be allowed for amounts paid in settlement of the taxpayer’s actual or potential liability for a civil penalty.1 In its income tax return for the year in suit, plaintiff deducted $43,000 which it had paid in settlement of a civil penalty assessed by the United States Bureau of Customs. The Commissioner of Internal Revenue *502disallowed the…