Today TaxMama hears from Barbara in Georgia, who says, “I was sued by my sister after our father’s death. Are these legal fees deductible?”
[TaxMama note to family: Don’t you love questions like this? No information at all…Some people go waaaaay overboard and provide their entire life’s story, complete with lots of numbers expecting me to run complex calculations. Others, simply a cryptic question without any information to from which to provide an answer. OK, we all know I’m a mind-reader, but, do you really want to test my clairvoyance skills during tax season? If you submit a question, please, be brief, but provide enough information so I have a starting point. Back to Barbara…]
I haven’t a clue. Why did she sue you?
Was there an estate and you inherited everything? If none of the estate was taxable in the first place, I don’t believe the legal fees would be deductible on your personal tax return.
If there were income-producing assets, like a business, stocks, IRAs, and such, you just might be able to deduct some or all of the legal costs to protect income-producing assets.
Did she sue you because you mis-appropriated her share of the estate, contrary to any written wills or trusts? If so, and if she won, that means you did. You don’t get to deduct legal fees.
Did she sue you simply because she didn’t like you? That’s strictly personal and there’s no tax effect as far as IRS is concerned, so….no.
She sounds like a good person to avoid in the future.
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