Legal and professional expenses that produce long-term benefits are non-deductible capital expenses that are included in the cost of ownership. The proof of the origin of the claim determines if a legal expense is related to an ordinary and necessary business activity or to a capital asset.
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What business entity is a separate legal entity?
A corporation, sometimes called a C corporation, is a legal entity independent of its owners. Corporations can make profits, pay taxes and be held legally responsible.
Can legal fees be an itemized deduction?
Legal fees related to personal matters cannot be included in your itemized deductions. The fees you pay in connection with the determination, collection, or refund of any tax.
What is an entity vs individual owner?
The corporate entity owns its own assets and is responsible for its own debts. The shareholders of the shares are considered the legal owners of the company.
Is a sole proprietorship a legal entity?
A sole proprietorship is not a separate legal entity, but is considered an extension of the owner. But you can trade under a trade name, such as “Bob Smith Plumbing”.
