I am being garnished for foreclosure of rental property. Can I deduct the amount I am being garnished as a legal expense for my partnership?

[kerriP · Accepted solution]

No not as an expense.  If you disposed of the property due to foreclosure the funds would be included as a part of reduction of  the debt during the foreclosure.  IRS says a foreclosure is still considered a sale, or in more technical terms, a "disposition" of property. 

The basic formula for calculating capital gains is to subtract the basis or cost of the property from the sales price. The difference is how much profit a person made, or how much money was lost on the transaction.