Disputed loan pay off fee

[John3cpa]

Client sold a shopping center with a 1.8m loan balnce. At closing (or just before) gets a notice from the bank that there is a 176k "swap fee" which looks to me like a pre payment penalty. He of course had to pay it in order to close. He has a lawyer who has sued a number of banks and has gotten selttlements recouping the fee. I'm thinking of "hanging" this fee up on the balance sheet of the LP, pending out come of the suit rather than expensing it as additional interest. It was sold at a loss and the partners can't use all of it anyway due to basis limits.
Any thoughts?

[BOB W]

Client sold a shopping center with a 1.8m loan balnce. At closing (or just before) gets a notice from the bank that there is a 176k "swap fee" which looks to me like a pre payment penalty. He of course had to pay it in order to close. He has a lawyer who has sued a number of banks and has gotten selttlements recouping the fee. I'm thinking of "hanging" this fee up on the balance sheet of the LP, pending out come of the suit rather than expensing it as additional interest. It was sold at a loss and the partners can't use all of it anyway due to basis limits.
Any thoughts?

I don't think your have a choice but to put off expensing this fee. Litigation means that there is an intent to collect.

Paying that fee should of increased basis somewhere.