 Most of this information comes from the tax guard for small business for individuals who use Schedule C Publication 334 Tax Year 2022. You can find on the IRS website, irs.gov, irs.gov, looking at the income tax formula. We're focused on line one income. Remember in the first half of the income tax formula is in essence an income statement, but just to outline other forms and schedules flowing into these line items. One of those, the Schedule C having business income minus business expenses. The business net income in essence flowing in from Schedule C to line one income of the income tax formula. The first page of the 1040 noting that the Schedule C flows into the Schedule 1, which flows into the first page of the form 1040 line number eight. The Schedule C profit or loss from business is formatted in an income statement. Format income minus expenses were focused on the expenses here more specifically on those related to legal and professional fees. So legal and professional fees. Legal and professional fees such as fees charged by accountants that are ordinary and necessary expenses directly related to the operating your business are deductible on Schedule C. So that is great. Make sure to pay your accountant well then since you get to deduct the legal and professionals. Obviously that makes sense because if the legal and professional work was for the purpose of your business, you would expect them to be ordinary and necessary and something to be deductible. Obviously it gets a little bit more confusing if your accountant is also doing professional work possibly doing your taxes and helping you with that as well which could have a personal component to it as opposed to simply a legal component in that case. And when you're talking about legal expenses, oftentimes we're thinking lawyers in that situation the question would be are you paying them for business related items or are you paying them for some kind of personal related item to see whether it would be deductible as a business expense. So however you usually cannot deduct legal fees you pay to acquire business assets so add them to the basis of the property. So you might think well wait a second that's still a business item that I bought business assets so let's say you bought a building or something like that then really what's happening here is if you had to pay the lawyer or something to go through the purchasing process or the professional to go through the purchasing process then do you get to expense it or do you have to include it into the asset of the building and possibly get the benefit from the expense by depreciating the asset if it's a depreciable asset as opposed to land which isn't depreciable. So that would be the item there so the question is do you have to capitalize it as something that's a fixed asset and then possibly depreciate it we would rather not have to do that usually from a tax standpoint because as we saw when we looked at depreciation the general rule is that we would like to get the expenses as early as possible usually for taxes so there's that situation. If the fees include payments for work of a personal nature such as making a will you can take a business deduction only for the part of the fee related to your business so now you're paying for something that might have some link to your business in which case you have something that's once again personal and business that's often where the fuzzy problem areas come in with taxes we have something that we can't neatly split up between business and personal and typically have to find some method to break out the business versus personal portion of something we're paying in order to deduct the business ordinary and necessary part