A client rented out 160 acres land. He only get paid once a year before planting season starts. 2017 he received land rent payment in March 2017. In October he decided to put the land into an irrevocable trust. He incurred 2000 lawyer fee. Can he deduct the lawyer fee in his 2017 trust return even he had no income on this trust return.
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my understanding has been if hiring a lawyer produced taxable income it was deductible on schedule A -
I would capitalize it
If the 1041 has no income and it is not the final year for the trust, then the loss generated by the legal fee will; not do any good as it can't be carried forward or distributed. So capitalizing the cost and adding it the the basis of the property is the way I would go.Comment
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I think you need to research whether any of the fee is deductible. This was to prepare a personal trust. On Sch A only the portion of the fee used for retention of income would be deductible.Believe nothing you have not personally researched and verified.Comment
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