Legal fees for criminal activities are deductible?

That’s what the Tax Court said in a case involving a taxpayer’s business activities reported on Schedule C. The deductibility of legal fees depends on the origin and character of the claim for which the expenses were incurred and whether the claim bears a sufficient nexus to the taxpayer’s business or income producing activities. Here, the origin of petitioners’ legal fees stemmed from the taxpayer’s business activities. Although seemingly against public policy, legal fees relating to criminal activity may be deducted as an ordinary and necessary expense of a trade or business. #IdeaoftheDay