Legal fees - tax deductions

[livnoutdoors]

I know from some research that most personal legal fees incurred are not tax deductible. However, I have a question surrounding fees incurred as a result of a property line dispute. Our neighbors filed a baseless property line claim as retaliation when my husband and I did not grant them an electrical easement across our property in the exact location that they desired it. To be clear, we did grant them an easement, at our cost, and received no payment for said easement but they were in essence, unhappy with the location. We spent the next several months dealing with costs of defending our recorded property lines. There was no substance to their claims and all was dismissed this summer. Are those fees deductible, under the civil rights provision? Also, I do have a hobby greenhouse business on my property but this was not related to the business or a cost of that business. Would the legal fees be deductible as a business expense, even if they were not directly related to the business?

[marctu]

Well I am sorry to hear that this happened to you.  It stinks that you incurred legal costs when you granted an easement at no cost.   I am glad you won though.

Unfortunately, there is no way in your fact pattern that these legal costs would be deductible since you state that the legal fees were not "... directly related to the business." 

Although, I am a lawyer this should not be construed as legal advice.  I am providing a case that you should read if you want to explore the reasoning: United States v. Gilmore, 372 U.S. 39 (1963) 

I am again sorry that this happened to you, and thank you for your question @livnoutdoors 

Be well and safe!

Marc T.

Turbo Tax Expert

27 Years of Experience Helping Clients

[Mike9241]

I am not a lawyer. 

see this link

https://andersonadvisors.com/are-legal-expenses-tax-deductible/#:~:text=Incurred%20legal%20expenses%... 

the issue is whether the legal fees defending property lines would be deemed related to defending title and thus add to the basis of your property. 

this from an old blog predating 2019