Trust post-termination legal fees

Forum|Forum|2 years ago
April 7, 2024
1 reply
10 views

A year after selling an inherited rental from husband's living trust, the widow/trustee is sued by his son (not a beneficiary). The trust assets (cash from the sale) had been distributed, final return was filed for 2021 (the year the rental was sold.) NOL and Excess Deductions on Termination were passed through on the 2021 K-1's and written off by the beneficiaries.

Are the legal fees paid in 2023 a misc deduction subject to 2% (that simply got swept under the tax carpet under TCJA 2018), or are they deductible in another way without reviving the Trust?

This topic has been closed for replies.

BobKamman

Level 15

Not sure it makes any difference, but is she being sued in her individual capacity, or as trustee, or both?

Courts have been known to award attorney fees to the prevailing party in such cases.

sjrcpa

Level 15

And what was the nature of the suit? Something to do with the rental?

Or wicked stepmom stole my inheritance?

The more I know the more I don’t know.

joshuabarksatlcsAuthor

Level 9

Yep. Wicked stepmom stole my inheritance. Boo hoo.

I think any reimbursement of legal fees down the road will be reported under the tax benefit rule in the year of receipt. In the meantime, I wonder if the fees paid in 2023 and 2024 could be in the nature of other than Sch A 2% misc.

I come here for kudos and IRonMaN's jokes.

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