We sold our rental property in 2020, however the buyer sued us in 2021 and we ended up paying him 26k and 10k in lawyers fees. Can we claim any loses?
We claimed the house sale in 2020 taxes.
Thank you all for any help.
Please see this answer from Hal_Al.
Report it as a long-term capital loss. Report it as the sale of land. The sale amount is zero and your cost basis is what you paid out, including legal fees. it's essentially a 2nd transaction on the original sale.
Please see this LINK for a more thorough discussion.
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