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RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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Can I deduct my restitution payments on my taxes

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Can I deduct my restitution payments on my taxes? I was convicted of a felony in federal court and I have to pay restitution.
What is the conviction for?
Customer: replied 9 years ago.
Three counts of wire fraud. It was a business investment that the feds said I misspent the money. Amount of restitution is $200,000.

Penalties and fines are generally not tax deductible. However restitution payments or disgorgement of profits have been deductible expenses in settlements with state and federal regulators. So as long as the Court judgement is clear that the payment is in the nature of restitution and not fines and penalties, these payments would be deductible in the ordinary course of business or as capital expenditure if capital in nature.

Link to one of the case law on this issue-


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Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.


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