Velma and Josh divorced. Velma's attorney fee of $4,000 is allocated as follows: Of the $4,000 Velma pays to her attorney, the amount she may deduct as an itemized deduction is:

Question

Velma and Josh divorced. Velma's attorney fee of $4,000 is allocated as follows:  Of the $4,000 Velma pays to her attorney, the amount she may deduct as an itemized deduction is:

Quizplus · Accepted Answer

Under current tax law, legal fees related to a divorce are generally not deductible. However, there is an exception for legal fees related to the production or collection of taxable income or in the pursuit of tax benefits. In this case, it is assumed that Velma's attorney fees are related to the production or collection of taxable income - specifically, in the pursuit of a more favorable divorce settlement. Therefore, she may deduct the portion of the fees that is attributable to tax advice (if any) and to the preparation or review of documents that affect her income tax liability. Based on the information given, it is not clear how much of Velma's attorney fee can be attributed to tax-related services, but if we assume that it is 11/16 (or about 69%) of the total fee, then Velma may deduct $1,100 as an itemized deduction.

Velma and Josh Divorced