Rental Property Legal Expenses post sale

I sold a rental property in 2019. In 2021 I was sued regarding the sale. Can I deduct the legal and judgement expenses in 2022?

posted

It depends. If you still have rental property, per IRS Pub 529 Legal Expenses, you can deduct expenses of resolving tax issues relating to the profit or loss from rentals reported on Schedule E.

However, if you are no longer in the rental business, these legal fees would be expenses for resolving nonbusiness tax issues are miscellaneous itemized deductions and are no longer deductible.

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