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Strayer (talk|edits) said:
| 4 August 2006
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| I have a client who owned 50% of a C corp - which has been sold - he is being sued by a previous employee, who is claiming sexual harrassment. Are the legal expenses deductible? If he settles out of court is the settlement paid deductible?
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MSTguy (talk|edits) said:
| 14 August 2006
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| Not likely. Under the "origin of the claim" test in Gilmore, if the origin of the litigation is a personal matter, the legal expenses are not deductible, even if the lawsuit later had an adverse effect on income-producing property or a trade or business. In other words, if legal expenses are NOT paid to defend or perfect title to property, to conserve or preserve income-producing property, or determine a tax liability, then they are not deductible.
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Taxperson (talk|edits) said:
| 14 August 2006
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| Sexucl harrassment has a broad definition that can include discrimination and/or retalitation. If the corporation itself is being sued, then the corporation may be entitled to a deduction. Read the original complaint to determine if this is a complaint under Title VII of the Civil Rights Act of 1964 or comparable state provision. There is a distinct possibility that your client could be entitled to an above the line deduction and/or capital loss deduction.
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Green hunter (talk|edits) said:
| 14 August 2006
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| I would double check to see who is eactly being sued is it the corporation or the individual.
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