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Bill
Bill, Enrolled Agent
Category: Tax
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Experience:  EA, CEBS - 35 years experience providing financial advice
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I am the Chapter 7 Trustee for an individual. She filed for ...

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I am the Chapter 7 Trustee for an individual. She filed for bankruptcy in October, 2003. On February 29, 2008, an EEOC claim was settled for $165,000.00. The basis of the claim is sexual harassment, hostile work envirornment, and emotional distress. Funds have not been received yet. I am trying to determine the taxability to the estate. Can the attorney''s fees and cost of administration be deducted? IRC Pub 525 discusses this briefly, but is not exactly clear. Any help will be appricated. Thanks, BCM
Submitted: 8 years ago.
Category: Tax
Expert:  Bill replied 8 years ago.

IRS Publication 908 goes into more detail. The fees and administration expenses are deductible as miscellaneous itemized deductions and any amounts in excess of 2% or adjusted gross income are deductible. Attorneys fees can be taken as an adjustment to income up to the amount of settlement income that is taxable. The following links provide more information:

See pages 4 and 6 - 9 - http://www.irs.gov/pub/irs-pdf/p908.pdf

See page 10 - http://www.irs.gov/pub/irs-pdf/p529.pdf

See page 29 - http://www.irs.gov/pub/irs-pdf/p525.pdf

http://www.irs.gov/pub/irs-pdf/p4345.pdf

 

 

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