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Commissioner, T.C. Memo. 1993-184 (placing the burden of
production on the taxpayer insofar as the taxpayer’s defense to
fraud is premised on offsetting deductions).
a. Cash Payments to Miller
The cash payments to Miller were not ordinary expenses
because they were not “normal, usual, or customary”, and the
transactions which gave rise to these expenses were not “of
common or frequent occurrence in the type of business involved.”
See Deputy v. Dupont, 308 U.S. 488, 495 (1940); United Draperies
v. Commissioner, 41 T.C. 457, 463 (1964), affd. 340 F.2d 936 (7th
Cir. 1964). Petitioners have not established that other
Burnsville customers paid cash in exchange for lower dumping
fees, or that such payments were a common practice in the Twin
Cities area. Thus, the cash payments are not deductible. See
Welch v. Helvering, 290 U.S. 111, 115 (1933). Moreover, section
162(c)(2) disallows deductions for payments that constitute “an
illegal bribe, illegal kickback, or other illegal payment” under
a “generally enforced” State law. Minn. Stat. Ann. sec. 609.86
(West Supp. 2002), a generally enforced State law, prohibits
commercial bribery. See sec. 1.162-18(b)(3), Income Tax Regs.
Thus, pursuant to section 162(c)(2), no deduction is permitted
for the cash payments to Miller.
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