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jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3159
Experience:  I've prepared all types of taxes since 1987.
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Are legal fees incurred to collect a stolen investment

Customer Question

Are legal fees incurred to collect a stolen investment deductible?
Submitted: 1 year ago.
Category: Tax
Expert:  jgordosea replied 1 year ago.
Greetings,
In general legal fees for the production or protection of investments (that generate taxable income) are a miscellaneous itemized deduction on Schedule A for an individual.
http://www.irs.gov/publications/p529/ar02.html
"You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9, you can deduct the ordinary and necessary expenses that you pay:
To produce or collect income that must be included in your gross income,
To manage, conserve, or maintain property held for producing such income, or
To determine, contest, pay, or claim a refund of any tax.
You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonable and closely related to these purposes."
Also, theft loss is available for items that were stolen.
http://www.irs.gov/publications/p547/ar02.html#en_US_2014_publink1000225230
If you must to pay a legal fee to recover stolen property, an individual can deduct the legal fee as part of the theft loss on Form 4684.
So, reasonable legal fees for investments are generally deductible and fees to recover stolen property are included in the theft loss claim.
Please ask if you need more discussion or information.
Thank you.
Customer: replied 1 year ago.
Thank you. That is very helpful.
Expert:  jgordosea replied 1 year ago.
You are quite welcome.
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