Treatment of Legal Fees Incurred by Individuals— footnotes

Editor’s note: Annette Nellen is editor of The Tax Adviser’s Campus to Clients column and a member of the AICPA’s Individual Tax Technical Resource Panel.

¹ Sec. 62(c) and Regs. Secs. 1.62-2(c)-(f).

² Regs. Sec. 1.263(a)-2(c).

³ Woodward, 397 US 572 (1970), and Stark, TC Memo 1999-1.

⁴ Gilmore, 372 US 39 (1963).

⁵ McKeague, 12 Cl. Ct. 671, 675 (1987).

⁶ Boagni, 59 TC 708, 713 (1973).

⁷ Regs. Secs. 1.212-1(k) and 1.263(a)-2(c).

⁸ “Where property is acquired by purchase, nothing is more clearly part of the process of acquisition than the establishment of a purchase price.” Woodward, 397 US 572, 579 (1970).

⁹ Baylin, 30 Fed. Cl. 248 (1993).

¹⁰ Jasko, 107 TC 30 (1996).

¹¹ Regs. Sec. 1.212-1(h).

¹² Regs. Sec. 1.262-1(b)(7).

¹³ Murphy, 48 TC 569 (1967).

¹⁴ Wang, TC Memo 1998-389, aff’d without pub. op. 35 Fed Appx 643 (9th Cir. 2002).

¹⁵ Nadiak, 356 F2d 911 (2d Cir. 1966).

¹⁶ Stiebling, 113 F3d 1243 (9th Cir. 1997).

¹⁷ Chaplin, TC Memo 2007-58. The court applied common-law rules to determine that the taxpayer was an employee rather than an independent contractor. Thus, the legal fees were deductible from AGI rather than for AGI.

¹⁸ Alexander, 72 F3d 938 (1st Cir. 1995).

¹⁹ Biehl, 351 F3d 982, 986 (9th Cir. 2003).

²⁰ Reynolds, 296 F3d 607 (7th Cir. 2002).

²¹ Metzger, 88 TC 834 (1987), aff’d without pub. op. 845 F2d 1013 (3d Cir. 1988); Bent, 835 F2d 67 (3d Cir. 1987).

²² Benci-Woodward, 219 F3d 941 (9th Cir. 2000), cert. den., 531 US 1112 (2001).

²³ Banks, 345 F3d 373 (6th Cir. 2003).

²⁴ See Lucas v. Earl, 281 US 111 (1930), and Helvering v. Horst, 311 US 112 (1940).

²⁵ Cotnam, 263 F2d 119 (5th Cir. 1959).

²⁶ Banaitis, 340 F3d 1074 (9th Cir. 2003). The Ninth Circuit reached different results in Benci-Woodward and Banaitis due to differences between California and Oregon laws.

²⁷ Regs. Sec. 1.212-1(k).

²⁸ Leonard, 94 F3d 523 (9th Cir. 1996). But see Baylin, 43 F3d 1451 (Fed. Cir. 1995), and Church, 80 TC 1104 (1983).

²⁹ Gilmore, 372 US 39, 51 (1963).

³⁰ Alexander, 72 F3d 938 (1st Cir. 1995).