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I have a family trust that invests in private lending. Unfortunately, we’ve had to pay legal expenses to foreclose on some borrowers. Can I deduct legal expenses?
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If the trust is engaged in business activities with a motive to earn a profit, then the legal fees would be deductible if they are ordinary and necessary for the generation of the income. By business activities, I mean they would have to be more than passive investing. The activity would have to entail effort that was continuous and regular, as opposed to sporadic. You can read more in this article from The Tax Advisor.
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