Case: U.S. Tax Court Upholds IRS Denial of Taxpayer’s Legal Expense Deductions (T.C. Memo)

The U.S. Tax Court upheld the IRS denial of the taxpayer’s deduction of legal expenses related to various lawsuits. The taxpayer, an individual, claimed a deduction for legal expenses on a tax return related to multiple lawsuits, including malpractice actions against former attorneys and appeals of unfavorable rulings. The IRS disallowed the claim. The Tax Court held that the taxpayer failed to substantiate the legal expenses claimed as required by IRC §6001 and §212(1). The court explained that the origin and character of the claim with respect to which an expense was incurred, rather than its potential consequences upon the ...