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The legal fees litigants pay for claims that fall fully under this exclusion are not at issue, since the exclusion of any income renders the legal fee deduction question irrelevant. Controversy over the tax treatment of contingent legal fees (not deductible as a trade or business expense) incurred in the recovery of taxable legal damages is not a new issue. The requirement that legal fee expenses be ordinary, necessary and reasonable to be deductible applies under both IRC Sec. |
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