Question

Legal fees incurred in connection with a criminal defense are deductible only if the crime is associated with the taxpayer's trade or business or income-producing activity.

a. True
b. False

Answer 1

Legal fees for criminal defense are generally not deductible on personal tax returns, and the claim that they are only deductible if associated with trade or business is false.

Step-by-step explanation:

The statement that legal fees incurred in connection with a criminal defense are deductible only if the crime is associated with the taxpayer's trade or business or income-producing activity is false.

Under current tax law, personal legal fees, including those related to a criminal defense, are generally not deductible on personal tax returns, regardless of whether they are connected to a trade or business. However, if the legal expenses are directly related to the taxpayer's business, they may potentially be deductible as business expenses.