Yes, amounts paid for settlements are deductible as long as the basis of the suit is in fact a business matter and not personal. In other words, the acts that gave rise to the litigation must have been performed in the ordinary course of your business.
The settlement amounts also cannot represent fines or similar penalties paid to a government for the violation of any law. Any amount of the settlement that is punitive in nature (designed to punish the wrong doer) instead of compensatory is not deductible.
IRS Notice 201412002
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