Tax Deductions for Damage Payments: What, Me Worry?

Tax Deductions for DamagePayments: What, Me Worry? By Robert W. WoodIt is axiomatic that when businesses are sued and payout settlements and judgments, they expect to do so on adeductible basis. That is especially true in America,where litigation is simply a cost of doing business. Itshould come as no surprise that there has never beenserious question about the deductibility of lawyers feesor settlement payments to resolve , some types of payments in that context raisecapitalization issues. For example, a lawsuit (and legalexpenses) over title to property must be capitalized andthen deducted ratably over the life of the asset.

‘‘remedial.’’ In contrast to fines, payments that are reme-dial or compensatory in nature are deductible.10 Obviously, importing deductibility characterization

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  Fine, Deduction, Tax deduction

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