In Information Letter 2021-0012[1] the IRS, while declining to provide the specific ruling the taxpayer requested, does provide specific examples of legal expenses that would not be deductible for income tax purposes.

The taxpayer’s request is described as follows:

This letter responds to your request, dated February 18, 2020, in which you are seeking a ruling on the deductibility of amounts you paid for legal services, rendered on your behalf in * * *, related to civil and criminal matters arising from your relationship with your former spouse, and the defense of your title to property claimed by your former spouse.[2]

The letter notes that “[u]nless expressly allowed by law, an individual’s personal, living, and family expenses are not deductible.”[3]  The IRS cites IRC §262 in support of this statement.

The letter then lists the following types of legal fees as being nondeductible:

• Paid in connection with civil or criminal charges resulting from a personal relationship;

• Property claims or property settlements in a divorce; and

• Defense of one’s title to property.[4]

The letter also notes that taxpayers who wish to obtain a formal ruling, which is what this letter is requesting, must apply and pay for a private letter ruling:

This letter calls attention to general principles of tax law without applying them to a specific set of facts. Sec. 2.04 of Rev. Proc. 2021-1, I.R.B.1 (or its successor). This letter is intended for informational purposes only, does not constitute a letter ruling, and is not binding on the Internal Revenue Service. In order to receive a written response applying the tax law to your specific set of facts, you must request a private letter ruling.

Section 7 of Revenue Procedure 2021-1 provides the general instructions for requesting a private letter ruling, which include the payment of the applicable user fee. Please note that we ordinarily do not issue a private letter ruling on any matter in which the determination requested is primarily one of fact. Sec. 6.02 of Rev. Proc. 2021-1.[5]

In this particular case, though, most advisers would suggest that applying for the formal ruling would likely be a waste of time and money unless there were additional facts that would make it less likely these would all be personal expenses.  And even in that case, there may be questions about the value of such a ruling unless the taxpayer simply wanted an “insurance policy” due to concerns the position might be challenged by the IRS and the taxpayer plans to not take the position if the IRS rules the items aren’t deductible.

[1] Information Letter 2021-0012, April 23, 2021 (released June 25, 2021), https://www.irs.gov/pub/irs-wd/21-0012.pdf (retrieved July 9, 2021)

[2] Information Letter 2021-0012, April 23, 2021

[3] Information Letter 2021-0012, April 23, 2021

[4] Information Letter 2021-0012, April 23, 2021

[5] Information Letter 2021-0012, April 23, 2021