Deducting Settlement Payment for Business Related Litigation on Personal Income Tax

[seekhelp]

My question involves personal finance in the State of: California.

I had shares in corporation A.
I was also employed by corporation A.
There was a dispute between myself & another major shareholder.
I was then tricked to resign.
Corporation A then sued me, alledging that I had taken money without approval (which was actually back pay / salary that was due to me), and alledging that some corporate expenses were actually my personal expenses.
I made a settlement payment & surrendered my shares of stocks to the corporation.
Since the litigation is business related (it is business related dispute), and I had lost my employement & my shares, would the settlement payment be deductible on my personal income tax return? (I'm assuming that legal fees are deductible but I'm not sure whether the settlement payment is).

[llworking]

My question involves personal finance in the State of: California.

I had shares in corporation A.
I was also employed by corporation A.
There was a dispute between myself & another major shareholder.
I was then tricked to resign.
Corporation A then sued me, alledging that I had taken money without approval (which was actually back pay / salary that was due to me), and alledging that some corporate expenses were actually my personal expenses.
I made a settlement payment & surrendered my shares of stocks to the corporation.
Since the litigation is business related (it is business related dispute), and I had lost my employement & my shares, would the settlement payment be deductible on my personal income tax return? (I'm assuming that legal fees are deductible but I'm not sure whether the settlement payment is).

You are going to need a local tax pro on this one. Maybe even a tax attorney.

There are several different issues involved. You may have a capital loss on the stock and the other expenses may be deductible. However if you admitted, even slightly, to any malfeasance, they may not be deductible at all.

You need a professional to thoroughly read the settlement documentation and advise you.