My son install a roof and bought materials and paid subcontractors and then customer stated he did not like the roof and wanted a refund. It went to court and we paid attorney and gave half of the money back to customer. Not sure how to code to account.
You have 2 transactions. One is purely legal fees defending you, the other is a refund of gross income. If roof was, for example $20k enter a customer credit memo for $10k and then select tools to refund the c.m. by check.
And separately your $10k fees to attorney for professional fees:legal expenses.
If you were slapped with any fines (and possibly the non recoverable court costs) these are NOT deductible
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