Ref: Barry v. Comm’r, TC Memo 2017-237

Summary: Taxpayer hired an attorney to reclaim alimony that he felt was overpaid.  He argued the legal fees were deductible under Sec 212(1) because the result would be taxable income.

Tax court: Not deductible: Under the “origin of claim” doctrine, the transaction started under family law and not under a profit seeking venture.  The Tax Court also referenced earlier decisions where it disallowed legal payments incurred for alimony adjustment and for alimony recovery in prior cases. Lastly, the Court argued that had Barry brought this claim in the year of the divorce, the legal fees would have been clearly nondeductible as part of the divorce proceedings (a personal expense).