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Subject Author Date
Legal Expenses on a previous business Don1975 12-18-2006
Posted by Don1975 on December 18, 2006, 8:24 pm
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 The previous business's assets were sold 5 years ago. The
lease still is legally in my name (as an individual, not as
a corporation), but the new tenants refused to pay.
Currently there is a lawsuit with a large sum of legal
expenses related to this business. 1) Are the legal
expenses deductable? If so where? (C or 2106) 2) If I am to
pay the lease payments, are those deductable even if the
time those fees were charged, I had no intention of
conducting business?

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Posted by Paul Thomas, CPA on December 20, 2006, 1:26 am
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> The previous business's assets were sold 5 years ago. The
> lease still is legally in my name (as an individual, not as
> a corporation), but the new tenants refused to pay.
> Currently there is a lawsuit with a large sum of legal
> expenses related to this business. 1) Are the legal
> expenses deductable? If so where? (C or 2106) 2) If I am to
> pay the lease payments, are those deductable even if the
> time those fees were charged, I had no intention of
> conducting business?

I'm sure you know what's going on, but your post lacks a few
facts.

Whose "previous business's assets" are you talking about,
and what was the form of that business?

For a sole-proprietor, unincorporated individual, the
remaining business expenses that are paid, sometimes years
after the "business" is closed, can still be taken on
Schedule C if that's where they would have been taken if the
business was still active. Your current intentions aren't a
factor, as long as the expenses are an extension of your
previous business activity.

If the business you are describing was in any other form,
then a different answer may be forthcoming.

The tax treatment of legal expenses depends on the nature of
the issue being litigated.

--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Paul Thomas, CPA on January 4, 2007, 8:35 pm
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This was e-mailed to me, but thought I'd share it here for
others to comment on.

----- Original Message -----
Sent: Thursday, January 04, 2007 9:51 AM
Subject: Re: Legal Expenses on a previous business

> The business was previously operating as a corporation (forms
> 2106 were submitted). All the assets are sold from the
> corporation, but the lawsuit is personal as the Real Estate
> Management company would not accept a corporate signature.
> There is no longer a corporation to file taxes on or income
> to claim the expenses to.

It's still a tad confusing as to what type of entity you
had. Form 2106 is for employee business expenses and don't
relate to either Schedule C or any of the corporate forms
(1120 series).

What I posted a couple of weeks ago still stands. If the
expenses you are now paying relate to the business activity,
you can still deduct them on the appropriate forms or
schedules even though there hasn't been an active business
for years.

You should make plans to talk to a local CPA or EA in your
area to discuss how you can best claim the expenses you are
now incurring on these transactions.

--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Don1975 on January 26, 2007, 5:20 am
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Ooops, I mistyped. I filed 1120's, not 2106. C Corp was the
original entity.

> This was e-mailed to me, but thought I'd share it here for
> others to comment on.
>
> ----- Original Message -----
> Sent: Thursday, January 04, 2007 9:51 AM
> Subject: Re: Legal Expenses on a previous business

>> The business was previously operating as a corporation (forms
>> 2106 were submitted). All the assets are sold from the
>> corporation, but the lawsuit is personal as the Real Estate
>> Management company would not accept a corporate signature.
>> There is no longer a corporation to file taxes on or income
>> to claim the expenses to.

> It's still a tad confusing as to what type of entity you
> had. Form 2106 is for employee business expenses and don't
> relate to either Schedule C or any of the corporate forms
> (1120 series).
>
> What I posted a couple of weeks ago still stands. If the
> expenses you are now paying relate to the business activity,
> you can still deduct them on the appropriate forms or
> schedules even though there hasn't been an active business
> for years.
>
> You should make plans to talk to a local CPA or EA in your
> area to discuss how you can best claim the expenses you are
> now incurring on these transactions.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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