Whether a taxpayer can claim a deduction for legal expenses generally depends on the origin of the claim giving rise to the legal expense. This means that even if the legal expense might arguably have an impact on one activity (say, a new trade or business the taxpayer is establishing) it will not be deductible as part of that activity if the claim originated elsewhere. The case of Dulik v. Commissioner deals with this issue.
See full discussion of Dulik v. Commissioner at: Legal Fees Related to Employment, Not Taxpayer’s New Business Venture — Current Federal Tax Developments
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.