scclark9

[scclark9]

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

My husband has a sole proprietorship. In 2002 he attempted to purchase property for the business. He put up $10,000 earnest money and obtained a contract. The owner decided to sell to someone else and did not repay the 10,000. After several years in court it was determined the owner and purchasng party were in breach of contract and my husband was awarded a second mortgage on the property(the current owner would not pay and is currently in bankruptcy). My question is "Are the legal fees deductible?" We have thousands of dollars in fees that have been paid and thousands more due. I know some fees are capitalized but these fees were incurred to obtain taxable money. Is there a tax code to use as reference?

Thanks
scclark9

 

[HappyWanderer]

The mortgage issue is a twist and the exact facts would be necessary. You'll need to see someone who will research the issue in order to get a real answer.

But, it's not going to be deductible as a business expense. You may be able to get some as an investment expense, if you get income from the second mortgage. Otherwise, it should be added to the basis (capitalized).

While my mind could be changed as I didn't research this at all (Too many odd things and specific facts would need to be known.) you clearly have a problem. Sorry.