deduction unreimbursed partnership legal expenses: where?

[brookefox]

What is the name of your state (only U.S. law)? WA

My wife is a passive general partner (18.75%) in a partnership whose business is rental real estate in Louisiana. The partnership is currently being dissolved after having sold its only property earlier this year (2009) after collecting insurance on the structure in 2007, after it was irreparably damaged by hurricane Katrina. For 2008, her K-1 showed a net rental real estate loss of $6585, and she personally had out-of-pocket unreimbursed partnership legal expenses of $22K. My question is where can we deduct the $22K? We are WA residents, with other small general partnership interests in LA.

Thank you.

 

[tranquility]

If a partnership expense, it should be on the K-1 even if it had to be specially allocated as she put it up. Depending on the expenses you could try to claim basis increase since you keep an "outside" basis for your investment. Otherwise Schedule A for defending your investment. See a tax advisor as there may need to be a review of facts and some research for exact treatment.

 

[brookefox]

Thanks very much for your reply. As it was not on the K-1, we'll look at a basis adjustment and/or schedule A deduction.