- 11 - are deductible if the suit against the taxpayer ‘arises in connection with’ or ‘proximately results from’ the taxpayer’s business or profit-seeking activity.” O’Malley v. Commissioner, 91 T.C. 352, 362 (1988)(quoting United States v. Gilmore, 372 U.S. at 48). Although employment-related legal fees are deductible under section 162 or 212, if the taxpayer’s trade or business consists of the performance of services as an employee, then the expenses are not deductible from gross income. Instead, they are treated as a miscellaneous itemized deduction, subject to the limitations of section 67(a). Petitioner contends that she filed the State court lawsuit in her capacity as an independent contractor, individually or on behalf of Neena Mosha, and that the origin and nature of the claim clearly arose in connection with this business activity. See also Silberman v. United States, 40 Fed. Cl. 895 (1998). As noted above, we found that petitioner was an employee of Mr. Gans and his related businesses and not an independent contractor. Therefore, petitioner is not entitled to deduct legal expenses arising from the settlement on her Schedule C but rather her legal fees and costs are deductible on Schedule A as an itemized deduction, subject to limitations. Settlement Portion to Former Spouse Petitioner contends that $3,728.65 of the settlement awardPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011