@rbyu wrote:
I was hoping for a more direct answer, yes investment is for business, and it was a business dispute. TBH, he lost the suit a judge order mediation to settle … He actually got the better part $$ house, but I am satisfied with smaller settlement just to end all ties..
Based on information you provided privately, you received money from the partnership in 2020, not 2021 (even though a 1099 hasn't been issued yet). That makes it 2020 income. Generally, if you sell an interest in a partnership for more than you originally invested, you have a capital gain, and if you sell for less than you originally invested, you have a capital loss.
If this was a real estate venture reported on schedule E, you would include your legal fees as a deductible rental expense on your 2020 schedule E. If you reported the business in some other way, I don't know how you would deduct your personal legal expenses related to a dispute between you and other members of the partnership. Perhaps someone else has a suggestion, or you may need to seek a professional opinion.
