Peter,Thank you for taking the time to respond.You wrote, Let me put my answer this way. I don't know if you can, but in your shoes, I would. The expenses just strike me as being incurred as an integral part of the sale.Yes, it strikes me as an integral part of the sale as well. Had I not filed suit against them, I would not have realized nearly as much of a gain - much of which went to the lawyer. Also, the stock itself was being held in escrow and the escrow agent was a majority shareholder in the company, so there was no real action they needed on my part to make the transaction go through - I had to sue to prevent it or get them to change the terms to something more equitable.The problem I have here is that the suit was initiated in early 2011 and most of my expenses were incurred in 2011, while the settlement was in 2012. Also since all of my taxes in the past has been on a cash basis, I felt it was necessary to find some way to expense most of my legal expenses in 2011 - thus the Schedule A filing. So my concern is that I will be switching from claiming these expenses on my schedule A in 2011 to claiming them directly as part of the income on Schedule D in 2012. That would seem to be a red flag. Of course if no one reported the sale, I'm not sure what the IRS would have to go on for an audit other than the fact that I'm claiming a substantial capital gain for 2012. Because of this unusual income, I'm guessing my return will have a good chance of triggering a manual review...I'll take your advice and mull it over. More and more, I don't think it's enough money to bother paying for a CPA's opinion no matter what. Now if I claim the expense on Schedule D and the IRS eventually says I'm wrong (and without a CPA's opinion to back it up), I'm risking penalties and interest. So to make my decision I have to wonder exactly how much in penalties and interest I might be risking if I file that way and I'm wrong.Finally, If I were advising them, I'd advise them to file a 1099B. The instructions say this form was only required of brokers and barter exchanges. This transaction involved no intermediary other than our lawyers and their accounting firm. I'm curious you would advise filing a 1099B in this situation?And yes, I do realize that this isn't my problem. That doesn't mean I don't want to understand it.- Joel
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