My client was a partner in a business which was sold in 2008. A couple years later, the business tanked and the buyers began to bring suit against just about everyone- their landlord, vendors, and of course, the partners who sold them the business. The suit against my client and his partners involved misrepresentation of the financial health and profitability of the business. The suit is scheduled to go to trial, but my client just settled out of court for around 30K and the case against him has been dismissed with prejudice (meaning it's over with once and for all and can't be re-litigated). He has legal fees and the settlement, all paid in full. I believe all of these costs are deductible, probably on a Schedule E, but would appreciate any feedback anyone can provide. Thank you.