Making the Proper Deductions for Legal Expenses

court cases

IRS grouches are ever on the prowl for what they characterize as improper deductions for payments to attorneys. Many of these disputed write-offs wind up in the courts. For the most part, they side with the IRS on what’s deductible.

Let me refer you to a decision way back in 1965 in which the Tax Court dismissed a case of a company that made a deduction for legal expenses on behalf of its principal shareholder Clark Hartwell. Hartwell’s wife sought to acquire an interest in his stock, but the company, Hartwell Corporation, failed to contend that the wife suffered from mental illness and her interference would disrupt the company’s business.

There are other cases, too, in the ongoing tussle between the IRS and taxpayers. In another one, a drug-trafficking probe of the Phoenix Fire Department resulted in the conviction on possession charges of one of its firefighters. Personal conduct, not firefighting duties, caused him to shell out for defense fees, which is why the Tax Court denied his deduction. 

A carpenter’s union member fought a suit charging union officials with misappropriating funds. Because the suit was unrelated to his work as a carpenter, the court ruled he wasn’t entitled to any deduction.

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About Julian Block

Julian Block

Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at


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