Results 1 to 9 of 9
  1. #1
    Join Date
    Oct 2006
    Posts
    1

    Default Deduction for Legal Fees From Bankruptcy

    I filed a chapter 13 Bankruptcy (Kentucky) last year and my lawyer and trustee takes 250.00 per month in fees for this. Will I beable to deduct these fees at the end of the year on my taxes? Just wondering.
    Thanks
    marcy

  2. #2
    Join Date
    Oct 2006
    Posts
    4,644

    Default Re: Legal Fees

    Quote Quoting marcy
    View Post
    I filed a chapter 13 Bankruptcy (Kentucky) last year and my lawyer and trustee takes 250.00 per month in fees for this. Will I beable to deduct these fees at the end of the year on my taxes? Just wondering.
    Thanks
    marcy
    No, you would not be able to deduct these fees from your federal taxes.

  3. #3
    Join Date
    Jan 2006
    Location
    Kentucky
    Posts
    70

    Default Re: Deduction for Legal Fees From Bankruptcy

    Ilworking - if back taxes were included in the bk filing, couldn't one construe that part of the attny fees were for deductible tax-related legal assistance?
    My attorney did have to do some work with the feds to properly include them.

    ???
    Thanks

  4. #4
    Join Date
    Oct 2006
    Posts
    4,644

    Default Re: Deduction for Legal Fees From Bankruptcy

    Quote Quoting olderbudwizer
    View Post
    Ilworking - if back taxes were included in the bk filing, couldn't one construe that part of the attny fees were for deductible tax-related legal assistance?
    My attorney did have to do some work with the feds to properly include them.

    ???
    Thanks
    That is pushing the envelope more than a bit. Yes, professional fees related to taxes are deductible, but only the portion related to taxes.

    If your BK fees are 2k, and your attorney spends 30 minutes dealing with the IRS, that doesn't make the whole 2k deductible.

  5. #5
    Join Date
    Jan 2006
    Location
    Kentucky
    Posts
    70

    Default Re: Deduction for Legal Fees From Bankruptcy

    Okay - I just wanted to be sure. I agree that one would need to carefully show the proportion of legal fee related to the taxes. On the other hand, since the attorney charged a flat fee (I was old rules) an equitable percentage-based split seems easy to defend, since 64% of the dollar amount discharged was for dischargeable taxes....

  6. #6
    Join Date
    Oct 2006
    Posts
    4,644

    Default Re: Deduction for Legal Fees From Bankruptcy

    I still don't agree. I think it would be proportional to amount of time the attorney spent working with the IRS.

  7. #7

    Default Re: Deduction for Legal Fees From Bankruptcy

    Assume this is a CH 7 Filing. If there is debt forgiveness that is recognized as income, then isn't all of it related to income?

  8. #8
    Join Date
    Oct 2006
    Posts
    4,644

    Default Re: Deduction for Legal Fees From Bankruptcy

    Quote Quoting April15Hater
    View Post
    Assume this is a CH 7 Filing. If there is debt forgiveness that is recognized as income, then isn't all of it related to income?
    You are hijacking a very old thread, but I cannot leave this question unanswered.

    Debt forgiveness is never recognized as income if the debt forgiveness is related to a bankruptcy case.

    So the answer to your question is no.

  9. #9
    Join Date
    Nov 2007
    Posts
    28

    Default Re: Deduction for Legal Fees From Bankruptcy

    The income from forgiveness of debt would be "excludable " from taxation. Expenses related to income that is not taxable are not deductable. Yes legal expenses paid for tax return preparation and/or representation in tax matters are deductible. That having been said, section 108 provides that to the extent that income from forgiveness of debt is excludable from income, then credits and losses are not deductible or usable. The section 108 regulations provides for a pecking order of the items not deductible, such as net operating losses, which generally would include the legal fees, depreciation, and credits, etc.

    1. Sponsored Links
       

Similar Threads

  1. Chapter 7: Enforcing a Promise to Pay Legal Fees and Impact of Bankruptcy on a Spouse
    By alenaspoppa in forum Bankruptcy Law
    Replies: 7
    Last Post: 08-25-2010, 06:07 AM
  2. Bankruptcy Issues: Liable for Condo Fees After Bankruptcy
    By cwjr1835 in forum Bankruptcy Law
    Replies: 2
    Last Post: 08-28-2009, 07:13 AM
  3. Chapter 7: Are Public Defender Fees Covered in Bankruptcy
    By Azdolfan in forum Bankruptcy Law
    Replies: 2
    Last Post: 05-01-2009, 08:39 PM
  4. Bankruptcy Issues: Can't Afford Legal Fees For Bankruptcy
    By losingbattle in forum Bankruptcy Law
    Replies: 1
    Last Post: 08-15-2007, 04:39 PM
  5. Divorce: Legal Fees
    By ALA in forum Divorce, Annulment and Separation
    Replies: 1
    Last Post: 07-05-2006, 02:29 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
 
Forum Sponsor
Free Tax Forms
Download free federal tax forms.




Untitled Document