The main thesis of this article is that Hawronsky v. Commissioner is erroneous and the deduction should be allowed because I.R.C. § 162(f) does not apply. The taxpayer did pay a "fine or similar penalty to the government," but he did not pay it "for the violation of any law," which is a necessary element of I.R.C. § 162(f). The taxpayer merely breached his NHSC contract. This crucial issue went completely unnoticed by the court and the parties. Because I.R.C. § 162(f) does not apply, the treble damages are (except for the original tax-free scholarship itself) a deductible business expense of buying out the NHSC service obligation. Along the way, however, the article finds much else to criticize in this problematic litigation. First, the "fine or similar penalty" language of I.R.C. § 162(f) is poorly conceived and has led to great confusion. Second, the judge-made "public policy doctrine," which I.R.C. § 162(f) was intended to simplify and replace was itself highly questionable, and probably ought to have been legislated away rather than codified. And finally, the NHSC's colossal treble-damage penalty seems harshly disproportionate to any actual harm that a scholarship participant's breach might cause, and probably should never have been enacted.

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