- 15 -
his attorney’s fees of $12,750, which petitioners paid in
September of 2002. During 2002, petitioners paid their attorney10
for services in connection with the lawsuit brought by the
realtor and paid $250 for mediation services. We are unable to
determine the exact amount that petitioners paid their attorney
because although petitioners submitted bank records which show
that such payments were made, they redacted the amounts.
Respondent contends that petitioners have not shown that the
Lakeshore property was other than their second home, for which
Schedule A itemized deductions are not available. Further,
respondent contends that even if Schedule A itemized deductions
were appropriate in connection with the lawsuit involving the
Lakeshore property, petitioners have not shown the extent to
which the litigation costs were related to the realtor’s demand
for the commission on the sale of the property as opposed to
petitioners’ counterclaims with respect to damage to their
personal property.
Payment of litigation costs may result in a tax benefit in
one of three ways. Section 162(a) governs the deductibility of
litigation costs as a business expense. Section 162(a) allows an
individual to deduct all of the ordinary and necessary expenses
of carrying on his trade or business. Closely related to this
10At trial, petitioners conceded that they had erroneously
included in the Schedule A amount some payments to their attorney
that had been made in 2001.
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: November 10, 2007