Can the payment made for copyright infringement voilation be deductible as a business expense?
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My take
We all know that if you get fined by the government including an order from a court to pay a third party you are found to have wronged you can't deduct that payment.
A settlement to avoid going to court I would expect to get the same treatment but I admit that before I did that to a client I would ask around as you are doing. If no one gives you a satisfactory answer here you might private message a couple of the folks who have particularly impressed you with the breadth and depth of their knowledge.
Do not overlook the possibility of deducting the legal fees incurred in this matter. I believe that they would be deductible as expenses incurred in an effort to save money. -
Most copyright infringement payments are considered payment of damages, not punitive or fines. There's a case in Boston right now (the Tenenbaum case) that's being appealed on the issue of whether the statutory damages are really punitive in nature.
I don't think that totally addresses the issue of whether or not they're deductible. It's just that they're probably not in the same category as being required to pay a fine or punitive damages.Comment
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Settlement
The overwhelming number of these things are usually settled when one of the parties is staring the court in the face.
The "infringement" becomes "royalties" by virtue of settlement. Royalties are fully deductible.Comment
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