Hello,

I am a private lender on a 100 acres of vacant land. The note/mortgage I hold is an investment. I am not a dealer.

The property is 3000 miles away and I am in the process of foreclosing on the borrower. As a result I am required to travel to the courts jurisdiction in which the foreclosure is taking place.

Are my legal and travel expenses tax deductible (attorney fees, court costs, flights, hotel, meals, etc.)? If they are, how are they reported on my personal tax return?

Thank you.

Are my legal and travel expenses tax deductible (attorney fees, court costs, flights, hotel, meals, etc.)? ======>>I guess It depends. As an investor who purchases real estate as an investment, you are not in the business of buying and selling vacant land on a continuous and extended basis. Rather, you purchase land and usually hold on to it for some time in the hope that it will appreciate in value to resell.

Since you are not engaged in a business, you are not entitled to business deductions and do not file Sch C UNLIKE a dealer. However, many investment expenses are deductible as personal itemized deductions on Sch A. These expenses are an ordinary tax deduction that results in tax benefits at your regular income tax rate; carrying costs such asbiz/job related legal and accounting fees, insurance,flight, and travel expenses are also deductible on Sch A.Laega/court fees fall into a gray area of tax law. Sometimes they're deductible, and sometimes they're not. Whether they're allowable – and where and how you deduct them – usually depend on why you retained the lawyer and what he did for you. Fees incurred for personal reasons are not typically deductible However, they are deductible only as miscellaneous itemized deductions. This means that they can be deducted only if, and to the extent, they exceed 2% of your AGI; You may deduct 50% of costs for meals while traveling on business.so UNLESS you itemize deductions on Sch A, you won't be able to deduct any of the expenses you incur from owning vacant land. In this event, you should elect to add these expenses to your land's cost basis. This will reduce any taxable profit you earn when you sell the property.








If they are, how are they reported on my personal tax return?=====>>>>>>>as said , you need to itemize deductions and report it on Sch A on line 21 /f2106

Yes, I understand that would be the case of I owned the real estate, but the key point point is I don't own the land. I'm the lender foreclosing on the land. Does that change how I can handle the expenses?

You can deduct legal fees related to doing or keeping your job. you could also deduct legal expenses relating to producing or collecting taxable income or getting tax advice. they would be miscellaneous itemized deductions subject to 2% of your AGI on Sch A. Since you have an expense for something that is used for your business, then, You can deduct the business expenses on your return aslongas you report income from your biz on your return; however, generally, you cannot deduct personal expenses. There's no hard and fast rule. The basic definition is that an expense must be "ordinary and necessary" for your trade /biz/ profession. Generally speaking, a business expense needs to have a legitimate business purpose.for example, say, someone who owes you money that you cannot collect, you have what is known a non-business bad debt. Non-business bad debts must be totally worthless to be deductible. You cannot deduct a partially worthless non-business bad debt. A non-business bad debt is reported on Form 1040, Sch D as a short-term capital loss which is subject to the capital loss limit of $3K per year)or ( $1.5K for a separate return). The IRS requires that you must establish that you have taken reasonable steps to collect the debt and that the debt is worthless. It is not necessary to go to court if you can show that a judgment from the court would be uncollectible.

Thanks for the additional explanation. I really appreciate you taking the time to help. I hope you have a great weekend.

hope it helps same to you. good luck