Client and other siblings are disputing about the inheritance. Client has incurred some expense in dealing with this problem. Would this be deductible on schedule A?
Attorney's Fees -Inheritance
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Another reason why this board is so important. My "gut" reaction was that the fees would be deductible based on the "preservation of income" argument; yet in doing just a quick research on the issue I discover that the fees are probably not deductilbe. Again, more information is needed in order to make a decision.
MaribethComment
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...Another reason why this board is so important. My "gut" reaction was that the fees would be deductible based on the "preservation of income" argument; yet in doing just a quick research on the issue I discover that the fees are probably not deductilbe. Again, more information is needed in order to make a decision.
Maribeth
Of course, there have also been a number of times I posted something really stupid, didn't have sense enough to know it was stupid, and got slapped down (which I appreciated). The latter is probably the most important because I'd rather be abused on this forum than trying to explain to a client why I totally blew it and he now owes an extra $5K."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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I think you have it bascially right. 212 allows hobby expenses up to taxable income from that hobby for instance. Investment expense on Sche A must be allocated between taxable/non-taxable investments. Attorney's fees in connection with attempts to obtain taxable income, to keep a job, in giving tax advice, to obtain lost wages (physical injury cases are an exception to taxable income) and some other situations up to gross includible income on the return. The general idea is that such expense must not exceed taxable income from that source. Thus, attorney's fees attributable to the obtaining of property are capitalized, so that when income is recognized at time of sale, they then become deductible by virtue of being added to basis. (The noticeable difference is that they are not subject to a 2% exclusion as they would be in the above cases reported on Sche A.)Last edited by Burke; 11-16-2010, 12:41 PM.Comment
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My recollection was that the fees were deductible if incurred for the "preservation of income". Master Tax guide references Reg. §1.212-1(k) and reads that legal expenses paid or incurred in recovering investment property and amounts of income includible in gross income are deductible. However, fees incurred in defending or perfecting title or in the acquisition or disposition of property are not deductible and must be capitalized.
Maribeth
preservation of income plus other fees equal attorney billComment
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