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I just received a lawsuit settlement for breach-of-contract.

The entire sum will be...
I just received a lawsuit settlement for breach-of-contract. The entire sum will be credited to me on an IRS1099, but the attorney feed is a 1/3 contingency. How do I recover the attorney fee taxes, Schedule A, C, other, and is the entire tax liability for the attorney fee recoverable?
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Answered in 6 minutes by:
8/5/2009
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Hello mrdaud,

The legal fees are deductible on Schedule A as part of your itemized deductions.

They are reported as a miscellaneous deduction, and deductions in that category must exceed 2% of your adjusted gross income before the excess can be claimed. The amount which exceeds 2% of your AGI will then become part of your itemized deductions and will reduce the taxable income you report from the settlement by that amount.

http://www.irs.gov/pub/irs-mssp/a9lawsut.pdf


If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you mrdaud.


Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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