John Edwards Acquittal – Can he deduct the full $2mil in legal fees?

by Bruce Givner on June 19, 2012

John Edwards’ trial was expensive, though he will probably deduct legal fees as a tax write off. How? It was a criminal trial, but the charges were related to political actions. This means that the legal fees may be a tax deductible business expense and there may be other considerations.

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It  would not be out of the question for Edwards, had he paid Reielle Hunter out of pocket, to deduct that money as well. Of course Mr. Edwards did not personally give her the money. It is actually presumed that someone paid her with campaign money. The trial was held concerning who gave Ms. Hunter the money, and whether John Edwards was aware.

Many people try to find a way to connect their legal troubles to business. The tax code only prohibits deducting monies paid to the government for violation of a law. ‘Payoffs,’ or bribes, are also non deductible.  However, as evidenced by having the ability to deduct legal fees, Mr. Edwards knows how to position himself to claim almost anything.

When the IRS denies a deduction, for example John Edwards’ legal fees, you can dispute the IRS’s position in court.  SEC v. Bilzerian is an example of how that works. Only payments which are themselves illegal are actually non deductible, regardless of whether or not the act of making that payment under certain circumstances may have been legal.

Givner & Kaye has over 75 years experience in income tax planning for high net worth and high income individuals. (310) 207-8008

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