Dole in US given out: that's fallacy (8)
I believe the answer is:
delusion
'fallacy' is the definition.
(I've seen this before)
'dole in us given out' is the wordplay.
'given' means one lot of letters go next to another.
'out' is an anagram indicator (out can mean wrong or inaccurate).
'dole'+'in'+'us'='doleinus'
'doleinus' with letters rearranged gives 'DELUSION'.
'that's' acts as a link.
(Other definitions for delusion that I've seen before include "Belief contradicted by reality" , "Misconception - deception" , "Unsoiled sort of hallucination" , "Misapprehension" , "Erroneous belief" .)