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Civil Restitution for readmittance to bar

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JohnnyDepp

Guest
What is the name of your state? New Jersey

In order to be readmitted to my state bar I am being required to pay into a restitution fund, can I deduct that as a 162 expense? or 165 loss
 


abezon

Senior Member
Check out Pub 535. You may only deduct expenses that are "ordinary & necessary" to your business. Ordinary = common & accepted. Necessary = helpful in your business.

The Internal Revenue Code says in sec. 162(f) Fines and penalties -- "No deduction shall be allowed under subsection (a) for any fine or similar penalty paid to a government for the violation of any law." However, the IRS publications say you cannot deduct "penalties & fines you pay to governmental agency or instrumentality because you broke the law." IF the IRS believes the bar ass'n is a gov't instrumentality, then you'd have to argue that the IRS position violates the IRC. You'll need to read the state law creating the bar association to see if it is a government instrumentality or an independent private body.
 

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