I was sent a C&D from otterbox's lawyers and we settled with me paying them $500 because I sold an phone case without their permission. Can I claim that as an expense?

[Anonymous_]

In relation to your business? If so, you can likely claim the payment as a business expense.

[westleyramsey]

Yes it was for my business. I was thinking maybe I could claim it under legal and professional fees?

[Anonymous_]

Is your business selling phone cases and accessories? 

[westleyramsey]

I resell everything from clothing to electronics. I was selling some phone cases when it happened but have since decided not to sell cases anymore.

[Anonymous_]

Probably just add the $500 to your cost of goods sold.

[Opus 17]

You can't deduct legal fees incurred by the business if you do something illegal.  However, this is a contract dispute, so you can deduct the legal fees.