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Level 5
February 15, 2024

Payer’s Deductions for Judgments and Settlements

  • February 15, 2024
  • 1 reply
  • 15 views

I have a client that had to pay over $80k for a judgment to a former client of his for a business that no longer exists.  It is a suit that started over 7 years ago and was just settled in 2023.

From what I have found if the judgement was paid during the course of business / generation of income it can be deducted from his income. 

My question is where would I make this type of deduction?

Any thoughts/insight apricated.

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    1 reply

    BobKamman
    Level 15
    February 15, 2024

    What return was the business filing?  Schedule C?  Cash method of accounting?  Where have the legal fees been deducted for the last seven years?  

    violajrAuthor
    Level 5
    February 15, 2024

    The business was actually ceased operation.

    It was a Schedule C cash.  Legal fees were all paid in 23.

    sjrcpa
    Level 15
    February 15, 2024

    Deduct on Schedule C even if there is no other Sch C activity.

    The more I know the more I don’t know.