Discussion:Legal settlements

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

(Difference between revisions)
Jump to: navigation, search
Revision as of 15:00, 13 August 2006
Tdoyle (Talk | contribs)
(Legal settlements moved to Discussion:Legal settlements)
← Previous diff		 Revision as of 03:46, 14 August 2006
MSTguy (Talk | contribs)
(Not likely. Und)
Next diff →
Line 2: Line 2:
{{ForumNewPost|UserID=Strayer|Date=4 August 2006|Text=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?}} {{ForumNewPost|UserID=Strayer|Date=4 August 2006|Text=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?}}
 +
 +{{ForumReplyPost|UserID=MSTguy|Date=14 August 2006|Text=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. }}

Revision as of 03:46, 14 August 2006

Discussion Forum Index --> Tax Questions --> Legal settlements

Strayer (talk|edits) said:

4 August 2006
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?

MSTguy (talk|edits) said:

14 August 2006
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.
Retrieved from "http://taxalmanac.org/index.php/Discussion:Legal_settlements"