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Schedule A Line 23 Deductions

I have questions on what is/is not allowed on Line 23 of Schedule A.

The form itself indicates examples are investment expenses or expenses on a safe deposit box.

The instruction indicates:

Enter the total amount you paid to produce or protect property held for earning income. But do not include any personal expenses.

Examples of expenses to include on line 23 are: Certain legal and accounting fees. Custodial (for example, trust account) fees.

In 2011 my wife and I established living trusts and had legal fees associated with this. When one establishes a trust, one does so to protect the assets in case of death, so I could interpret I am protecting property held for earning income, and therefore could interpret that my attorney fees are deductible here. Alternatively, I could see how this could be interpreted as a personal expense and therefore not deductible.

I also obtained a safe deposit box and store the trust original documents, so again, I could interpret this cost as deductible, or a non-deductible personal expense.

Also this year, some personal investments incurred transaction fees (front end load on purchase, back end load on sale, account maintenance fees). Again, I could interpret that these investments earn income, so the fees are deductible or alternatively this is a personal expense and the fees are not deductible.

So are any or all of these costs deductible or not deductible?

Reply to
Dimitrios Paskoudniakis
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Never mind, it doesn't matter, as the total is less than 2% of AGI so even if I could deduct this, I could only deduct the amount above 2% of AGI.

Reply to
Dimitrios Paskoudniakis

The formation of a trust is to avoid the length probate process and perhaps to shield assets in the case of some lawsuits, and I don't think the fees to set up the trust qualify because they don't let you create new income directly. Attorney fees to get back-pay would qualify for a deduction.

Because you store trust documents, and not financial things like stocks certificates, jewelry I think no deduction here.

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Safe deposit box rent. You can deduct rent you pay for a safe deposit box if you use the box to store taxable income-producing stocks, bonds, or other investment-related papers and documents. If you also use the box to store tax-exempt securities or personal items, you can deduct only part of the rent. See Tax-exempt income under Nondeductible Expenses, later, to figure what part you can deduct.

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However, I'm thinking it might be better to get a safe deposit box for $300 which can often withstand 1750 degrees C for 1 or 2 hours. Over

6 years it could pay itself off. But it's heavy and you have to install it.

The transaction fees on specific purchases of stock are deductible when you sell the stock. Say you bought 10k of mutual funds with a front-load of 10%. They most likely gave you 9k of this fund and kept

1k (as opposed to charging you an additional 10% or 11k in total). The cost basis of the stock is 10k, so when you sell the stock for 9.5k you actually have a loss of 0.5k. But if they charged you an additional 1k, your cost basis is 11k.

I think account maintenance fees are deductible as on Schedule A subject to the 2% rule as long as you buy taxable securities in the account.

However there are lots of brokerages that have no fees.

Reply to
removeps-groups

True, because of the 2% rule, this deduction is often useless. Also the deduction is not allowed under AMT. However you must add all of your misc expenses, and perhaps you will be over the 2% limit: unreimbursed employee expenses like uniforms, education, etc, tax preparation fees, union dues, and much more.

Reply to
removeps-groups

Setting up a trust is partly for financial and tax planning, and to that extent it may be deductible. OP should ask his attorney for a letter detailing his opinion about how much of the fee he paid was for routine estate planning, and how much for financial and tax planning.

___ Stu

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Reply to
Stuart A. Bronstein

Thank you, but it is moot as my fees were well below 2% of AGI. I had minimal additional expenses that could be lumped with this so I still would not come close to 2% AGI. Also, the attorney's fee schedule coupled with the time of year I executed the trust was such that I paid one half in December 2011 and the other half in January 2012.

Reply to
Dimitrios Paskoudniakis

However this website says

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Generally, you can't deduct fees paid for advice or help on personal matters or for things that don't produce taxable income. For example, you can't deduct fees for:

  • Filing and winning a personal injury lawsuit or wrongful death action - the money you win isn't included in your gross income and so it's not taxable * Settling a will or probate matter between your family members * Help in closing the purchase of your home * Defending you in a civil lawsuit or criminal case that's not work-related, such as defending you on a drunk driving charge or against a neighbor's claim that your dog bit and injured her child

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How does setting up a trust increase taxable income?

Reply to
removeps-groups

I had always been told that things done to plan for and prepare taxes, such as tax preparation, are deductible even though they don't lead to increased income. But they do lead to payment of the least taxes.

I haven't ever had the occasion to research that issue, however. My brief look into the regulations doesn't show that to be the case. ___ Stu

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Reply to
Stuart A. Bronstein

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