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Taxing Income from Unlawful Activities, 25 Case Western Law Review 130 (1974)


In a series of cases dating back to the 1920s, the Supreme Court
has considered whether earnings derived from unlawful activities constitute
taxable income. After tracing the development of this case
law, Professor Bittker asserts that the federal income tax statutes
have contained no clear congressional mandate on this issue and
that therefore the question may appropriately be resolved from a
policy standpoint. Professor Bittker admits that some of the arguments
against taxability, such as the potential for discriminatory
enforcement and the possibility of prejudice to the defendant at trial,
have merit, but he contends that these problems can be solved short
of immunizing from tax all illegal profits and concludes that the
optimal rule is to tax the net income from any unlawful activity.

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