Answers · Deductions, assets & depreciation
Can a Business Deduct Legal and Professional Fees?
Legal/professional fees are generally deductible when arising from ordinary business matters, but capital-transaction fees can require capitalization.
How it works
The rule, and what it turns on.
The origin-of-claim doctrine focuses on the underlying matter.
Example
Attorney fees defending a routine contract dispute may be deductible; legal costs acquiring a building generally go to basis.
Common mistakes
What we see go wrong, and what we do instead.
- Deducting every legal invoice automatically.
A better approach
- Ask counsel to break invoices down by matter when treatment differs.
Authority
Where this comes from, so you can check it.
IRC §162 or §212 where applicable; capitalization may apply under IRC §263; origin-of-claim doctrine.
Relevant case law
United States v. Gilmore, 372 U.S. 39 (1963) - deductibility of legal fees generally follows the origin and character of
the claim.
Commissioner v. Tellier, 383 U.S. 687 (1966) - ordinary and necessary legal expenses may be deductible despite an
unfavorable context, absent a sharply defined public policy bar.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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