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  1. #1
    Join Date
    Jan 2019

    Default Can You Take a 20% Pass-Through Business Deduction on a Lawsuit Settlement

    Apologies for length. In 2018 I won a legal settlement arising from my eviction from my home/studio. Not a passive claim, all administrative, store equipment and editing done there. I ended up moving 30 miles away from majority of my client base.

    My business is creating legal presentations for trial and mediation. For tenants rights lawyers. Represented by my client's firm AND working for them simultaneously. BUT not being paid for my services. My work greatly exceeded the normal, including hiring/supervision of 3rd party providers, whose findings were key.

    I'm not seeking to deduct legal fees. Prin/Agent issues aside, can I deduct 20% pass-through on the initial payment? Received 60%, then 40% over 5yr. structured. (tax paperwork filed and will be paid each year they're incurred). I've had several accountants and CPA's refuse me as a client bc/ too complicated or new reform law too much. Any help appreciated!

  2. #2
    Join Date
    Sep 2005
    Behind a Desk

    Default Re: Pass-Through Deduction.or Principal-Agent Relationship Blurred Past the Point

    Should we infer that you're operating in the U.S.?

    Are you asking if you can treat the settlement as business income, then take the 20% pass-through deduction for small business owners from that income?

    A judgment to you, personally, for the eviction from your home is not business income. You have not shared any facts that would suggest that any compensation you received for wrongful eviction related to the operation of your business or lost business income, even if you were running your business from your home.

    You have apparently consulted numerous accountants about your situation and have presumably shared with them detailed information about your situation, only to be told that it is very complex. You must reasonably therefore understand that sharing a few sentences on a forum, where we are left knowing next to nothing about your complex situation, is not a reliable means of obtaining a meaningful analysis of your tax options.

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