Tax Court denies deduction for legal fees from personal malpractice lawsuits
Joanne G. Rosso v. Commissioner of Internal Revenue, T.C. memo. 2025-115, Docket No. 12344-15 (filed November 6, 2025).
Legal fees from malpractice and contract disputes with former attorneys were not deductible because they were personal and not tied to producing or collecting income.
Holding
The Tax Court held that Joanne G. Rosso could not deduct $28,485 of 2012 legal expenses. She did not substantiate $2,194 and did not show that the remaining $26,291 was for producing or collecting income under § 212. The court sustained the IRS disallowance.
Why It Matters
Fees from suing or being sued over personal legal services are generally personal, not income-producing.
The origin-of-the-claim tests the controls, not how the taxpayer characterizes the expense.
Substantiation continues to be a crucial requirement, and amounts that are unproven cannot be deducted.
Timeline
2008: Rosso sues former attorney Horton; the trial court enters judgment for Horton in 2010.
2010: Rosso sues attorney Fleck; jury returns defense verdict in December 2012; new trial motion denied.
2012: Arbitration decision for Deckard; appellate co…
