If I lost a lawsuit settlement, can I deduct or write off what I have to pay to the plaintiff?
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If I lost a lawsuit settlement, can I deduct or write off what I have to pay to the plaintiff?
Asked on May 12, 2015 under Business Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 9 years ago | Contributor
IF it was a legitimate business expense, then possibily you can; but if it is an amount you had to pay due to something which was not a business activity, then no. Examples: a dispute over a contract and what it means, if the dispute was reasonable, is likely something that would let you write off the judgment, since depending a position on a contract is a legitimate business expense. But if you or an employee tried to steal money from a customer, that is not a legitimate busines activity and a settlement would likely not be deductible, since stealing is not a legitimate busines activiy. Speak with a CPA about the situation to see if this settlment is deductible.
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