is this reportable?

[schirallicpa]

My client divorced "lisa" a number of years ago. He had purchased a house that they lived in. According to their divorce agreement, she was to pay him $40,000. She never paid him. He got a lawyer. Now - maybe 5 years later, an agreement has been reached for her to pay $15000 over time.

I believe that this is completely outside of the tax return. However, can he deduct his (outrageous) attorney fees on schedule A subject to 2%

[mcb39]

My thinking is "No" and "No"..........I don't believe that you can deduct something that does not refer to any item of income. Wiser minds than mine can chime in here.

[jklcpa]

It sounds like the receipt of funds will still be considered a transfer because of the settlement incident to their divorce. There are additional rules that will allow these transfers that are made later than one year to be considered as such. There is a 6 year rule that you should read up on. Check in IRS Pub 504 under Property Settlements for a start.

I don't think the legal fees are deductible. From that same pub:

Nondeductible expenses. You cannot deduct the costs of personal advice, counseling, or legal action in a divorce. These costs are not deductible, even if they are paid, in part, to arrive at a financial settlement or to protect income-producing property.

[schirallicpa]

Well - I just talked to him and he informed me they were never married. So, that gives me a new twist.

[Jack from Ohio]

Well - I just talked to him and he informed me they were never married. So, that gives me a new twist.

Don't you just love when people play house, then when things go bad, they want results as if they were married!!

[OldJack]

Well... you got to find out more facts. Why is she to pay him something? Is there a reportable sale of a house or interest in property by your client?