Johnny Depp Can Write Off Legal Fees, Amber Heard Can’t, Here’s Why

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Talk about a double whammy. After ruling on the $10,350,000 she owes Depp, Amber Heard’s attorney says the actress can’t pay Depp the colossal judgment that the court says she owes her. Add to that Hurd’s tax problems, and it seems to pile on the bad news. Already had a bad divorce, but the live-streamed trial was about defamation, whether Depp abused her, and ultimately whether Heard defamed her in a 2018 op-ed she accused of domestic abuse. Wrote about being a victim. The jury found that Heard defamed Depp, and awarded him $10 million in compensatory damages and $5 million in punitive damages, which were reduced to $350,000. Heard was awarded $2 million in damages, so before the tally-appeal, which Heard has already vowed to pursue—Depp is $10,350,000, and Heard is $2M. But why the tax problem?

Taxes will matter a lot, and the tax bill could turn ugly over the loss of Johnny Depp and Amber Heard. Heard had promised $3.5 million to the ACLU after receiving $7 million in divorce from Depp, but only $1.3 million has gone to the ACLU so far. Regarding the tax deduction for legal fees, aren’t all legal fees deductible on your taxes? Hardly not. Depp could argue that he sued to protect his business, and the IRS may well buy into it, since the op-ed cost Depp a lot of the lost business. The IRS could say it was still a personal matter, just one that had a business impact, but Depp and his tax people could still claim the deduction. They can convince the IRS, and they might not even have to. After all, most tax returns — even if you’re rich and famous — aren’t audited. Of course, Johnny Depp and Amber Heard may have other tax issues as well.

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But Amber Heard wouldn’t be so lucky. Her case is personal, and this can make her tax deduction especially harsh. She Must Pay Taxes on the $2M, But She Might Not Be Able to Deduct any Part of the $10,350,000 judgment says he must pay Depp. And legal fees are another real problem here. Both Depp and Heard spent big, huge amounts on legal fees for this case. Each spent millions, though Depp certainly spent more, well over $5 million, than estimated. Depp could say it was business, because it took a toll on his career.

But the tax cut case for Hurd is pretty weak. In her case, it appears to be a personal dispute, not one about her business or profession. That means paying millions in legal fees — and $10,350,000 in damages — without any tax deductions. They aren’t the only litigants facing big taxes when they settle a lawsuit. Since 2018, many plaintiffs cannot deduct their legal fees, such as a tax on legal settlement, need to be creative in finding parties Ways to deduct their legal fees,

Even contingency charges don’t solve it. If the lawyer is entitled to 40%, the plaintiff will generally only receive a net recovery after fees. but below Commissioner Vs. Bank, 543 US 426 (2005), in contingency fee cases the plaintiff must generally include 100% of the proceeds, even if paid directly to the attorney. One of the Many Weirdest Rules on How Legal It Is settlements are taxed, This strict tax rule usually means the plaintiff must find a way decrease their 40% fee, maybe one of these 12 ways to deduct legal fees under the new tax laws,

Credit: www.forbes.com /

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