Tank Truck Rentals v. Commissioner

Tank Truck Rentals (plaintiff) was a Pennsylvania-based corporation that transported bulk liquids in tank trucks across several states. In 1951 Pennsylvania imposed a 45,000-pound weight limit on trucks. Most of the other states that Tank Truck Rentals did business in had weight limits of 60,000 pounds. The trucks that Tank Truck Rentals used had 4,500- to 5,000-gallon capacities, so that if the tanks were full the trucks exceeded Pennsylvania’s weight limit. As it would have been unsafe to transport partially full tanks and economically unfeasible to buy a fleet of smaller tank trucks, Tank Truck Rentals decided to operate its trucks at full capacity, over Pennsylvania’s limit, and incur the cost of whatever violations were discovered. Over the course of 1951, Tank Truck Rentals paid approximately $40,000 in fines for 718 willful and 28 innocent violations of weight restrictions. Tank Truck Rentals classified these fines as ordinary and necessary business expenses and deducted them. The Commissioner of Internal Revenue (the Commissioner) (defendant) disallowed the deductions. The United States Tax Court affirmed the Commissioner, holding that the deductions would go against public policy given that the fines were incurred after Tank Truck Rentals violated weight-limit laws. The court of appeals affirmed the tax court, and Tank Truck Rentals appealed.