gatortaxguy wrote:It looks deductible to me under 162(f)(2)(A)(i)II -- "is paid to come into compliance with any law which was violated or otherwise involved in the investigation or inquiry described in paragraph (1)".
It sounds like the payment being made is payment to settle under a settlement agreement to prevent trial, which is denied a deduction under (f)(1).
The quoted subclause II is regarding costs of complying with a law, not a settlement. This is defined in the regs as costs to get into compliance with a law that was violated. For example, I was sued because I didn't have handicap ramps; I paid to settle with the client and I also paid to get handicap ramps to get into compliance with the law. The settlement is not deductible, but the cost to build handicap ramps to get into compliance is deductible.