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Deductibility of legal advice on residential easement?

Single-family residence A includes a rental apartment; residence owner deducts prop rata portion of various "shared expenses" (gardening, furnace repairs, utilities, driveway repairs) against the rental income, and also depreciates residential basis against the rental income on a pro rata floor-area ratio basis. Residence B next door is sold. New owner is unhappy to discover after purchase that a portion of A's driveway and gate intrudes on corner of his property (A and B were both built many decades ago in poorly surveyed rural area). Makes threatening enough noises that owner of A gets paid legal advice verifying that he has prescriptive easement to continue this intrusion. Can pro rata portion of the legal costs be deducted against rental income as "Legal and professional fees"? Can remainder be added to residence basis? Other approaches?

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Reply to
AES
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It ALL gets capitalized in one form or another as they were legal fees to perfect a title.

-- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062

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Reply to
David Woods, EA, ChFC, CLU

I appreciate the various answers to my initial query (even if some of them were wildly contradictory!), and can see the argument for what seems to be the majority view as summarized above. Just to make a (definitely non-expert) counter argument, however: In the end neighbor B, when informed of the legal advice obtained by A, backed off on initial intention to build a boundary fence on B's property in a way that would have cut off A's "permissive easement" encroachment, and slightly rerouted it to avoid the problem. None of this, however, went on record in any official records, county registrar or the like. Not clear, therefore, that title was really "perfected" in any official or meaningful way (or in B's mind). And the legal advice had to do with both what the law would (probably) decide and with some tactics and strategy -- e.g., "fight or cave?" -- so the layman might argue it was professional or business "advice", perhaps deductible? In any event, guess A will ask his professional tax preparers, and do what they're happy with . . .

Reply to
AES

Nope. Only legal fees related to the collection of income or tax compliance are potentially deductible. In this case you were doing neither. Rather, you were seeking to protect your title or property rights. MTW

Reply to
MTW

Why isn't the standard "ordinary and necessary" like with everything else? Stu

Reply to
Stuart A. Bronstein

It DOES apply. We're talking about the "ordinary and necessary" costs related to collecting income or obtaining tax advice. On the other hand, costs that benefit more than one year, or have an indefinite life, must generally be capitalized. MTW

Reply to
MTW

Where is "ordinary and necessary" in IRC 212?

Reply to
D. Stussy

Where? Roughly in the middle of the second line.

SECTION 212. EXPENSES FOR PRODUCTION OF INCOME

In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year--

MTW

Reply to
MTW

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