Funny story involving dance and broken toe (8)
I believe the answer is:
anecdote
'funny story' is the definition.
(anecdote can mean a humorous story)
'involving dance and broken toe' is the wordplay.
'involving' indicates anagramming the letters.
'and' says to put letters next to each other.
'broken' is an anagram indicator.
'dance' with letters rearranged gives 'anecd'.
'toe' is an anagram of 'ote'.
'anecd'+'ote'='ANECDOTE'
(Other definitions for anecdote that I've seen before include "Account regarded as unreliable" , "Reminiscence, story" , "Neat code (anag.)" , "Short enteryaining tale" , "Yarn" .)