Quote Quoting pmerner
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I was involved in some complicated litigation in federal court in 2006 that resulted in my 1992 chapter 7 bankruptcy being reopened. The reason being that I had not properly included my one percent interest in a non-public corporation gifted to me in 1975 by a cousin. Once the 1992 bankruptcy was re-opened the trustee asserted that I had been guilty of fraud and conspiracy and the attorney I had hired advised that I needed to respond to these allegations if I wanted to avoid the trustee obtaining a default judgment against me. The issues were litigated at length with the result that I incurred attorney fees amounting to more than $45,000 over three years. I eventually agreed to a settlement, without admitting to guilt on the civil allegations, which amounted to $35,000 and settled the case and closed the bankruptcy again.

I understand from other posts here that the legal fees are not deductible and am wondering about the logic behind that.

I also need to know if the settlement payment would be deductible.

I was a legal resident of the state of New York during the entire period involved and am still a resident of that state.

Thanks in advance.
This is not an issue that can be answered on an internet message forum. You would need the advice of a tax professional who can review all of the related documentation.