allowableOne-time items
Non-recurring legal and settlement costs
Litigation, settlement or legal fees tied to a resolved matter that will not recur.
Rule
Add back when the matter is closed and documented. Ongoing litigation is not an add-back, and may be a liability.
Evidence lenders expect
- Invoices from counsel
- Settlement agreement or dismissal
- Narrative in memo
Worked example
As reported
Legal fees $84,000 in FY2024
In the memo
Patent dispute settled March 2024 · $84,000 added back
The objection you will hear
Legal fees that appear in all three years at similar levels.
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