Guidelines for the deduction of litigation expense and damage payments

Article Abstract:

Taxpayers wishing to deduct litigation-related expenses must consider the character of the claim as well as limitations placed on deductibility. Only expenses related to trade or business are deductible, so personal litigation expenses are not deductible. Most litigation expenses will not be currently deductible and will have to be capitalized because the expenses result in a benefit to the taxpayer that extends beyond the current tax year. Fines and penalties are not deductible, but civil settlements are deductible despite the fact that the conduct involved may have been illegal.

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Qualifying equity interests in reorganizations: a more limited species?

Article Abstract:

The Clinton administration's proposals on nonqualified preferred stock creates a distinction between preferred and common shares likely to negate the historically tax-free treatment of preferred stock received in corporate reorganizations. The Treasury's rationale for this change is questionable. The change will impair the use of preferred stock in such transactions, because, under the proposal, the stock would be considered boot subject to taxable gain.

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Norwest Corp.: can you bank on the deductibility of compensation expense and legal costs incurred incident to an acquisition?

Article Abstract:

The author examines the US Tax Court's decision in Norwest Corp. and its impact of the deductibility of compensation expense and legal costs incurred during an acquisition.

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