The dueling complaints filed by Fox News’ Bill O’Reilly (of the popular O’Reilly Factor) and associate producer Andrea Mackris raise a number claims:

• Mr. O’Reilly’s 16-page complaint charges Ms. Mackris and her attorneys with extortion, infliction of emotional distress, and wrongful interference with contractual relations.
• Ms. Mackris’s 22-page complaint charges Mr. O’Reilly with sexual harassment and with creating a hostile work environment.

The complaints raise several tax issues:

• On the income side:

• Mr. O’Reilly & Fox News: Any recovery on the extortion claims would constitute income for tax purposes.
• Ms. Mackris: Any recovery on the sexual harassment and hostile work environment claims also would constitute income for tax purposes, unless she is able to prove that a portion is compensation for physical injuries under Code § 104.

• On the deduction side:

• Mr. O’Reilly & Fox News: Attorneys’ fees would be deductible under the “origin of the claim” test to the extent the fees were business-related. That may be problematic in the case of fees incurred in the defense of Ms. Mackris’s lawsuit.
• Ms. Mackris: Under the new tax bill to be signed by President Bush, Ms. Mackris would be able to deduct her attorneys’ fees from any taxable recovery she receives to the extent the recovery is for “unlawful discrimination” within the meaning of amended Code § 62.