D. Stussy wrote:

- quote -

Where? Roughly in the middle of the second line.

SECTION 212. EXPENSES FOR PRODUCTION OF INCOME

In the case of an individual, there shall be allowed as a
deduction all the ordinary and necessary expenses paid or
incurred during the taxable year--

MTW

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MTW wrote:

- quote -

Where is "ordinary and necessary" in IRC 212?

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"David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote:

- quote -

Sometimes.

- quote -

Ok, thanks.

Stu

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"Lynn Guini" <Lynn[at]nospan.com> wrote:
- quote -

Of course if that's what the facts were....oh wait, they're
not.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:
- quote -

Do you consider litigation to be ordinary and necessary?
Moreover, there is the tax law concept of origin of claim,
which tends to apply to costs of litigation.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Stuart A. Bronstein wrote:

- quote -

It DOES apply. We're talking about the "ordinary and
necessary" costs related to collecting income or obtaining
tax advice. <grin> On the other hand, costs that benefit
more than one year, or have an indefinite life, must
generally be capitalized.

MTW

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Lynn Guini wrote:

- quote -

As a new age guru might say, "I will allow you your own
truth." <grin
The scenario you described was not part of the original
post. If legal fees are incurred to collect rent from a
disgruntled tenant or otherwise settle a lease, I'm sure
they would be deductible. But that is not the case under
discussion.

MTW

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Stuart A. Bronstein wrote:
- quote -

Because IRC 212, not IRC 162, is what allows a deduction of
expenses for income producing activities that AREN'T
businesses. "Ordinary and necessary" appears only in IRC
162.

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"MTW" <mtwingcpa[at]yahoo.com> wrote:
- quote -

let's see now . . .

A does NOT get legal advice, B continues bullying, moves
fence to "his" property line. A's tenants say - hey, I'm
not paying all this rent not to have a driveway, and leave.
A is unable to rent property without reduced rent.

So, getting this legal advice IS related to collection of
income. and thus, deducible.

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"MTW" <mtwingcpa[at]yahoo.com> wrote:
- quote -

Why isn't the standard "ordinary and necessary" like with
everything else?

Stu

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AES wrote:

- quote -

Nope. Only legal fees related to the collection of income or
tax compliance are potentially deductible. In this case you
were doing neither. Rather, you were seeking to protect your
title or property rights.

MTW

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"David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote:

- quote -

I appreciate the various answers to my initial query (even
if some of them were wildly contradictory!), and can see the
argument for what seems to be the majority view as
summarized above.

Just to make a (definitely non-expert) counter argument,
however:

In the end neighbor B, when informed of the legal advice
obtained by A, backed off on initial intention to build a
boundary fence on B's property in a way that would have cut
off A's "permissive easement" encroachment, and slightly
rerouted it to avoid the problem. None of this, however,
went on record in any official records, county registrar or
the like. Not clear, therefore, that title was really
"perfected" in any official or meaningful way (or in B's
mind).

And the legal advice had to do with both what the law would
(probably) decide and with some tactics and strategy --
e.g., "fight or cave?" -- so the layman might argue it was
professional or business "advice", perhaps deductible?

In any event, guess A will ask his professional tax
preparers, and do what they're happy with . . .

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"AES" <siegman[at]stanford.edu> wrote:

- quote -

It ALL gets capitalized in one form or another as they were
legal fees to perfect a title.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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AES wrote:

- quote -

It sounds to me like these legal expenses were incurred to
perfect or maintain title, not to collect income.
Accordingly, I'd say the amount can be capitalized with
respect to both the rental and residence portions, but
cannot be deducted outright in either case.

MTW

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AES wrote:

- quote -

Yes for the first, and probably not for the second.

But this advice is ALSO worth what you pay for it.

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AES wrote:

- quote -

No. Defense of property is not deductible.

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Single-family residence A includes a rental apartment;
residence owner deducts prop rata portion of various "shared
expenses" (gardening, furnace repairs, utilities, driveway
repairs) against the rental income, and also depreciates
residential basis against the rental income on a pro rata
floor-area ratio basis.

Residence B next door is sold. New owner is unhappy to
discover after purchase that a portion of A's driveway and
gate intrudes on corner of his property (A and B were both
built many decades ago in poorly surveyed rural area).
Makes threatening enough noises that owner of A gets paid
legal advice verifying that he has prescriptive easement to
continue this intrusion.

Can pro rata portion of the legal costs be deducted against
rental income as "Legal and professional fees"? Can
remainder be added to residence basis? Other approaches?

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