I had to use some of my own personal money to help pay for a lawsuit against my corporation

Asked over 1 year ago - Los Angeles, CA

Can I taek this off my personal income taxes? Thanks

Attorney answers (4)

  1. John Michael Goralka

    Pro

    Contributor Level 7

    7

    Lawyers agree

    Answered . First, I am sorry about the lawsuit and the use of your personal funds. Your ability to receive a tax benefit for the funds spent defending this matter depends in part on the nature or basis of the lawsuit against the corporation and whether the corporation is an "S" corporation or a "C" corporation. An S corporation is a pass through entity which may enable you to recieve some benefit for the funds spent. Whether the claim or lawsuit will support a current deduction depends upon the basis for the lawsuit or claim. while this depends on the nature of the claim and the analysis is somewhat technical, but if the lawsuit and defense was to protect or preserve the receipt of taxable income, then there may be a basis for the deduction for legal fees. If the lawsuit is regarding ownership of property or another captiol asset, the n the fees may be required to be capitolized to be amoritized over future years. Needless to say, some ceativity may be possible on those issues and the analysis can be somewhat technical and fact specific. You should review this with and CPA or attorney who focuses on tax issues.

  2. Raphael Samuel Moore

    Contributor Level 16

    7

    Lawyers agree

    Answered . Best to talk to a CPA.

    Our replies to Avvo questions should not be considered specific legal advice to any individual, and no attorney-... more
  3. Michael Charles Doland

    Contributor Level 20

    6

    Lawyers agree

    Answered . No lawyer wants to take the risk of malpractice regarding tax advice when he/she has not been retained. You should check with your CPA and ask if it quallifies as a deductable expense necessary for the preservation of a capital asset.

    The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may... more
  4. Evan A Nielsen

    Contributor Level 18

    3

    Lawyers agree

    Answered . Yes. You paid the corporation's legal fees and are entitled to either be reimbursed by the corporation (which would make the legal fees and expense for the croporation) or treat it as a capital infusion (which would add to your capital account but would also allow the corporation to treat the legal fees as an expense). If the corporation doesn't take the expense on it's books then you'd be able to claim the expense on yours.

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