Discussion:Legal Fees-DUI Defense

since he is attempting to protect his driving privileges which are necessary for his employment. I have never heard of such a thing. He is a businessman, not a truck driver. Has anyone ever claimed such a deduction?

Unfortunately, we as tax professionals are always having to bring our tax clients back to reality with the "bad news" and having to justify ourselves as to why these legal fees are not deductible for "tax" purposes.

It IS possible to get a DUI on a bicycle in some states, or so I've been told. In others, you can get a DUI if you are riding a horse whilst intoxicated. (You, not the horse.)In NM, DUI is possible on a snowmobile or in a motorboat.

I've yet to see DUI on a pogostick but I'm sure it's only a matter of time.

I have taken the position that a DUI is deductible for the businessman under either of these circumstances: A) if he got drunk with one of his customers while discussing business (today, this means discussing bankruptcy strategy), and as long as he only takes 50% of the amount of his drinks as a deduction, OR B) 100% of the cost of the DUI is deductible if you have a magnetic sign on your car with your business name on it, and you throw up on it before being arrested.

If you think I'm wrong about this, cite your code section, Regs., and all relavant cases in your defense.

I think we should get off the backs of these lawyers who are carrying the weight of the world on their shoulders right now, and concentrate on throwing all these EA's and CPA's in jail for the illegal practice of law which they seem to do every day without having a clue. I am authorized to state that the local chapters of the Daughters of the American Revolt and the Puerto Rican Legal Defense Squad are in unanimous agreement with my position on this subject, besides all the friends I have coffee with each morning at McDonalds.

1. Real estate sales people who tell clients 'all those settlement costs of buying your house are deductible,'

Anyone want to take on insurance men? Or brother-in-laws?

Riley2 - Many participants in this forum would argue that you are, in fact, king of the world.

While I drink with the best of them at times, I follow the DD rule or taxi rules - I am in just total disagreement.

Unfortunately, unless someone can come up with something more specific on this, I am going to have to break from Riley2's first post on this subject and disagree with his siding with Crow. Certainly fully agree with Riley2's second post.

There is no way under the sun that you can convince me that under rain, hell or high water that legal fees defending a DUI case can be classified as an ordinary and necessary business expense. It is totally unnecessary that someone needs to become inebriated while performing their job as a sales man or anything else. It is not even ordinary and necessary for one who tastes alcohol for a living to be operating a vehicle in public while drunk.

How many of you know someone who has been killed by a drunk driver - and your going to tell me that if they were "working" they can take a legitimate tax deduction for defending themselves! Not a chance in hell.

So a covered individual gets his lawyer free through the plan. Surely my insurance company can deduct the cost of providing the defense lawyer, right?

And the employer could deduct the cost of providing the insurance coverage as an employee benefit, right?

Or not?

(I THINK that the employee would have to include the value of the employer-paid plan premium in his W-2 income. I am unaware of any exemption for legal insurance like there is for life or medical.)

It's called common law...courts have always made law under our system (please tell Lindsey Graham for me), which we got from England.**

Though it's true that there is no federal common law (strictly speaking), the courts can do amazing things with these federal statutes if called upon to do so, and if you give them something to hang their hat on. And, that's as it should be because it's impossible for a legislature to forsee every possible application that a wiley EA or CPA can torture the law with!

.**members of the Elephant party, if you don't believe me, study the definitions for common law.

Suppose I murder someone at work (there's that perfume wearer in the next cubicle over) and will lose my job if I get convicted? Does that make the attorney fees deductible?

There was an episode of WKRP where Venus and Johnny drink on the air and show how their reflexes decreased the more they drank.

So if Venus or Johnny drove after the program and got a DUI, wouldn't that be related to their employment with the station?

Just thinking out loud.

Salesmen are expected to entertain customers.

A fee paid to a criminal attorney is not a “fine or penalty”.

If a tax preparer is tried and convicted for tax fraud and conspiracy committed during the normal course of his employment, would there be any problem with deducting the criminal attorney fees? No, of course not.

Thus, if I am a professional debt collector and I commit a battery on a debtor in order to collect the debt, this is clearly unacceptable behavior, but there is no doubt that my legal fees for my criminal defense would be deductible.

If the taxpayer was arrested for assault (as an alternative example), would the lawyer's argument now be that the legal fees are deductible because staying out of the slammer is necessary for your employment? I think Michaelstar is right on target.

Whee! This is FUN!

Also, the fact that the conduct of the taxpayer is outrageous and not within acceptable norms has no bearing on the deductibility of the legal costs. For example, the Tax Court will allow a deduction for legal costs for defending against criminal tax fraud charges if the taxpayer was making a living from his fraudulent activities. See William Terry v. Commissioner.

Such a simple question but such fascinating comments and analysis by some of the best minds on this board (and I'm NOT including myself in there...)

Being an "elephant" I could really care less of Crow's position and his political implications and certainly am willing to wait until the fat lady signs on his party......(because being an elephant I fully believe she is going to sing loud and clear) parable or not! Sorry for the "political" side bar but I am getting very tired and need to voice that opinion........ this is a tax site...........

Looks like I am going to need to print out these court cases sited above (and yes burn a couple of trees because I like it on paper) and read where Riley2 is coming from and work on the lesson he is so very kindly working on to point out. If Riley2 is correct which is more probable than not (unfortunately), then maybe this needs to be pointed out to MADD and others in Congress and changed within the tax code. As most of us have agreed, from a gut point of view - it is just not right!

Any "A"hole who goes out and gets drunk under the auspicious of doing their job and drives a vehicle on our public highways (that we all pay for with our hard earned tax dollars)and gets busted needs to go to jail. Then for them to be able to defend themselves and receive a tax deduction for their defense is just plain wrong and if that is the case - this needs to be changed.

[Okay, okay, I admit it...I DO assume DUI defendants are guilty as sin and one of the reasons I like my current job is that I don't have to defend any more of those sniveling, lying, disgusting, denying slimeballs. Give me a hot check artist or cocaine dealer any day. They tend to be much clearer-eyed than some scumsucker facing his third or fourth (or fifth or sixth) DUI but who insists that he "doesn't have a problem". There's something to be said for professionalism, even amongst criminals.]

The key to this relevant portion of the Terry decision is that the legal fees were paid as a result Prof Terry being in the TRADE or BUSINESS of preparing tax returns. The judge notes: "The other item which petitioner attempted to substantiate for 1973 was the deduction of an attorney's fee of $1,400. Clearly, petitioner's indictment was in connection with his tax preparation service business and it is under this category that petitioner deducted a $1,400 legal fee."

I fail to see how an arrest for DUI is in anyway connected to a TRADE or BUSINESS. It is an arrest for a PERSONAL violation of the law. Perhaps, I'm missing something but your cites do not appear to be persuasive for purposes of analogy.

I had a client who was cited for talking on his cell phone while driving. I deducted his legal fees for defending against the citation since he happened to be talking to his employer at the time of the citation.

[T.C. Memo. 2008-237]

[T.C. Memo. 2000-106]

After reading this thread several business come to mind, Taxi Driver, (although OP stated individual was not a 'truck driver'), stock brokers, attorneys, and accountants.

Should you decide to deduct legal fees via 162 and/or 212, I would suggest documenting your files with as much detailed information (attorney bills) and case law as possible.

Good Luck

TexCPA 01:04, 20 July 2009 (CDT)

The real issue in the original post is whether the salesman got drunk during the normal course of business and was driving drunk as a result of that business activity. If so, then I see no problem with the deduction. On the other hand, if he was driving home from a day at the beach, I see no deduction.

So, for what it is worth, if he is an employee, and if this incident transpired in the 'normal course of business,' we could look at Noland v Commissioner, a 1959 TCM affirmed by the 4th Circuit:

"When the corporation, reimbursing its officers and employees for direct expense incurred in furthering its business, does not reimburse an officer for a particular expense, that expense prime facie is personal, either because it was voluntarily assumed or because it did not arise directly out of the exigencies of the business of the Corporation."

I've taken this from the dissent of Judge Jacobs in Noyce. Jacobs goes on to cite Stolk v Comm [40 TC 345, 357) affirmed by the 2nd Circuit in 1964. "However, if the employer requires or expects the employee to incur the expense without the employer's reimbursement, then the expense may be deductible."

Assuming arguendo that the taxpayer was arrested for DUI not related to his emplyment, Greenway TC Memo 1980-97 suggests the attorney's claim in the original post that the costs are deductible is indeed not correct.

[start]Petitioner contends that he is entitled to deduct, as a business expense, a fee paid to an attorney to defend him against a charge of driving while under the influence of alcohol, because a conviction would have resulted in revocation of his driver's license, without which he would have been unable to get to work.

While the charge against petitioner might have had an incidental effect on his employment, that possibility is not determinative of the deductibility of petitioner's legal expenses. The deductibility of legal expenses is determined by the "origin and character of the claim with respect to which an expense was incurred, rather than its potential consequences upon the fortunes of the taxpayer." United States v. Gilmore, 372 U.S. 39, 49 [ 11 AFTR 2d 758] (1963). The charge against petitioner arose out of a personal activity and the nature of the charge of drunken driving was unrelated to petitioner's business as an author or professor. As such, legal expenses incurred in connection with that charge are not deductible. Compare Commissioner v. Tellier, 383 U.S. 687 [ 17 AFTR 2d 633] (1966), with United States v. Gilmore, supra.[end]