Are legal fees incurred to sell property deductible?

[Debster2020]

Due to a boundary dispute with the neighbor of my vacation home I had to hire a surveyor to establish the boundary and a lawyer to sue the neighbor when he would not agree to my offer of an easement.  The property could not be sold without resolving the boundary dispute.   Are the approximately $2,000 in surveyor fees and $10,000 in attorneys' fees deductible at all?

[macuser_22]

Possibly of it is commercial business property or rental property, but not if a personal residence.   You might be able to add the costs to your basis to lower the capital gains.

[Carl]

If this was a rental or other business property at the time of the sale, I know your surveyor fees are deductible as a sales expense. While I'm confident the attorney's fees can be added to your cost basis, I'd suggest you check with both a tax attorney and a real estate attorney on that to confirm it. For all I know, what's acceptable in my state, may not be in your state.

For the attorney's fees, since it's definite they have nothing to do with title transfer of the property to the buyer, it's a hard call on if it's a sales expense, adds to the cost basis of the property, or is just flat out neither option. I also wonder if you could get away with claiming it as a rental expense.

[tagteam · Accepted solution]

This actually sounds like a title defect and legal fees incurred in the course of defending and perfecting a title are added to the basis of the property.

See https://www.irs.gov/publications/p551#f15094c01

I would also suggest an in-person consultation with a tax professional or legal counsel.