I have an S corporation. If I paid for personal attorney fees (personal trust fees) from the S corporation for more than $600, do I issue a 1099 from the S corporation? I am 100% owner. Also, how do I record the fees on the tax return? As a distribution?

ANSWER

The BIDaWIZ Team's Answer:

You would not issue a 1099 as it's a personal expense and unrelated to the business. You should treat the amount paid as distribution to the shareholder and reported as such. This would be reflected on your schedule K-1. Unfortunately, personal attorney fees are generally not deductible. However, some Tax Courts have opined that attorney fees associated with estate planning and an income producing action may be deductible as a Schedule A itemized expense. This is referenced in IRC Section 7430 and IRS Publication 529.