“Taxes are inevitable, but not so deductions. And that has become an issue of late as the courts weigh in on whether a taxpayer — either an individual or a company — can deduct the costs related to a government enforcement action.
“A recent decision from the Court of Federal Claims in Washington looked at whether the forfeiture of the proceeds from insider trading qualifies for a deduction, raising the question of how the tax code may be seen as indirectly subsidizing wrongdoing.
“The law allows for the deduction of “any loss sustained during the taxable year and not compensated for by insurance or otherwise.” But another provision specifically excludes “any fine or similar penalty paid to a government for the violation of any law.” Criminal fines imposed by a court are clearly not deductible, but it is not so easy to categorize the treatment of orders requiring the forfeiture of the proceeds derived from criminal activity.”
Read full NY Times article here.