Attorney-at-Law

SO DEAR TO MY HEART

In Uncategorized on 02/27/2017 at 17:03

No, not the 1948 Disney feel-good movie; rather, today’s off-the-bencher from STJ Lewis (“Oh, that Spelling!”) Carluzzo concerns two subjects dear to my heart… legal fees and deductible business expenses.

John M. Majcher, Docket No. 1903-16S, filed 2/27/17 is one-for-two in that ballgame. He pays legal fees that amount to most of his income for the year at issue, but they aren’t deductible business expenses.

John and his loved-once have a child. John had liberal visitation rights, and used them. Child resided with loved-once in IL, where John lived. But loved-one lost her job and moved to AZ, allegedly on a temporary basis.

John was fearful.

“Concerned that his child’s temporary living arrangements in Arizona might become permanent, and if that happened, what impact that might have on his visitation rights, child support obligations and his relationship with his child, Petitioner hired a lawyer to protect and/or enforce his parental rights. During [year at issue] he paid more than $24,000 in legal fees in this regard, which amount represents a substantial portion of his entire income for that year. He deducted those legal fees on a Schedule A, Itemized deductions, included with his return, which he prepared and filed late.” Order at pp. 6-7.

Well, I’m all for family values, glad when lawyers get paid, and love deductions, but how is this deductible?

“According to Petitioner, the legal expenses are deductible because .they were incurred so that he would not have to move to Arizona to ensure or enforce his parental rights. Petitioner goes on to argue that if he had to move to Arizona, he would have had to give up his employment in Illinois and probably could not have secured similar employment in Arizona. So, as he views the matter, the legal expenses were incurred and paid, in effect, to maintain his employment. According to Petitioner the fees should be deductible as unreimbursed employee business expenses.” Order, at p. 7.

IRS suggests these legal fees are to do with John’s domestic arrangements, not his employment, and STJ Lew agrees.

“Like Respondent, however, we connect the legal expenses here in dispute to petitioner’s relationship with his child, not to his employment in Illinois. That being so, we find that Petitioner’s personal, family and living circumstances are the origin of the claim for legal fees, the deduction of which is precluded by section 262, and reject Petitioner’s claim that the legal fees represent ordinary and necessary employee business expenses otherwise deductible under section 162. It follows that Petitioner is not entitled to the deduction here in dispute and we so hold.” Order, at p. 8.

I give John a Taishoff “Good try, Second Class.”

Ascribing his late filing to his familial woes doesn’t cut it, either. STJ Lew is sympathetic, but John gets the late-filing chop anyway.

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