Section 162 (a) provides that there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including—
(1) a reasonable allowance for salaries or other compensation for personal services actually rendered;
(2) traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business; and
(3) rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity.

Section 162 (f) provides that no deduction shall be allowed under subsection (a) for any fine or similar penalty paid to a government for the violation of any law. The $8 million payment cannot be deducted because it reduced the fine for $15 million to $7 million. If the IRS allowed the deduction it would be a double benefit to the taxpayer. The Income Tax Regulations states that a fine or similar penalty includes any amount paid in settlement of the taxpayer’s conduct or potential liability for a fine or penalty whether civil or criminal. (Treasury Regulations Section 1.162-21(b) Courts generally differentiate between amounts paid as a fine and money paid as damages, with money paid as damages being deductible as an ordinary business expense. (Schnadig Corp vs. Gaines Manufacturing Co.)

According to the IRS Publication 529, you can deduct legal fees related to doing or keeping your job. To deduct legal expenses, the taxpayer must be able to show that the origin and character of the claim are directly related to trade or business; an income-producing activity; or the determination, collection, or refund of a tax.