The legal feud between Justin Baldoni and Blake Lively isn’t just courtroom drama, it’s a masterclass in how taxes seep into every aspect of life, even Hollywood showdowns.

Take Baldoni’s legal fees. If he claims they’re tied to protecting his professional reputation, he might deduct them as “ordinary and necessary” business expenses under Internal Revenue Code Section 162(a). This hinges on proving the case directly impacts his career. But if the IRS sees it as too personal, those deductions vanish.

Now flip the script, what if Lively wins damages? Emotional distress payouts, unless tied to physical injury, are taxable income under Internal Revenue Code Section 104(a). Punitive damages? Always taxable. So, even a multimillion-dollar win could come with a hefty IRS bill.

The takeaway for everyday taxpayers? Legal costs tied to income or business can sometimes be deductible, but personal cases rarely qualify. And winning damages? Plan for taxes unless it’s a physical injury case.

This saga shows us one thing: whether you’re a Hollywood star or a middle-class taxpayer, the IRS always gets its share. Baldoni and Lively’s clash reminds us that even in fame, there’s no escaping taxes.