My co-owner was court ordered to buy out my half interest in a jointly owned rental property. I have incurred $20,000 in legal fees to get this partition action complete. I am assuming the $20,000 is a business expense since I was forced to the courts to get sale completed. I have a choice of settlement dates, 12/2014 or 1/2015. Since my legal fees occurred in 2014 would it be advantages to settle in 2014 and use the $20,000 as an expense or would it be better to settle in 2015 and use the $20,000 off my cost basis of property. Thank you.

The tax law does not specifically mention legal fees as deductible items. Therefore, the deductibility of such expenditures depends on the context in which they are incurred;in general, you can't deduct legal fees paid for advice or help on your personal matters or for things that don't produce taxable income; Your legal fees are personal expenses. However, all of the legal expenses that you incur connected with your ownership or operation of a business enterprise are fully deductible. This includes legal fees incurred in establishing your business, legal fees associated with maintaining your business operations and those legal expenses that arise out of any legal dispute or action involving your business enterprise.

If you're concerned about whether you'll be able to deduct attorney's fees, you can always ask your attorney -

You stated "those legal expenses that arise out of any legal dispute or action involving your business enterprise." That is what I am asking, can I deduct fees for having to hire an attorney to force a partition action because the co-owner of property refused to split the rents. The court ruled in my favor, ordering the property sold and all back rentals reimbursed. Would these attorney fees paid to settle a business dispute be a business expense on my tax return.

as i said, it depends; aslongas you file Sch C/SE then yes you can dedcut fees for having to hire an attorney to force a partition action for biz expenses. however, the IRS says that most individuals renting property to others will report rental income using Sch E, NOT ON Sch C/SE. However, if you provide what the IRS calls "substantial services" to your tenants, or if you're a real estate dealer, you would report the income using Sch C
/SE, tyhen i guess you can deduct it as part of your biz related expenses on your Sch C.please contact the IRS or IRS EA/ a CPA specializing in taxds in yourt local area for more info in detail.

Generally, you can't deduct fees paid for advice or help on personal matters.