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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15731
Experience:  15years with H & R Block. Divisional leader, Instructor
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This is a difficult situation. we brought property with a

Customer Question

this is a difficult situation. we brought property with a cottage and ranch house costing 318,000. in 2008. my birth mother gave us 100,000. and lived in the cottage. in 2010 her husband went into a nursing home and because of Medicaid and VA benefits she filled out a legal document saying she would be paying $850 a month rent for the cottage. she never paid. in 2014 the step father passed and his daughter moved to the area. troubles began, it became ugly, we filed eviction to have them removed, a lawsuit was initiated by them and in 2015 we sold the home and we went out separate ways paying them off to the tune of 255,000 (100,000 of that was her money back that she gave us toward the purchase). she never paid rent, her name was not on the deed, we owned the house. can we use any of the above as deductions?
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.


You bought the property but she gave you $100,000. If she did this as a gift then she should have reported that on form 709 because that was above the annual limit for gifts in 2008 ($12000 to each of you).

If she gave you the $100,000 as rent prepaid then you would have reported that on Schedule E as rental.

The lawsuit for eviction would be a business expense had you reported as rental. If you did not report the $100k as rental then this is all personal and not deductible.

You are allowed to claim expenses (especially legal fees) against business or against taxable income.

The IRS would see this all as personal and not deductible.

I wish I could advise differently but personal items of this nature are not deductible.