USA Expenses related to a closed business

[maineken]

I sold my business and a year later was sued. I had legal expenses but I had to put them on my Schedule A because the business no longer exists. Line 27 of Schedule A says Misc Deductions, but it seems applicable as it is "used to produce or collect taxable income". Line 28 {Other Misc Deductions) seems more appropriate but does not list this type of expense.

This is HUGE for me as the first way triggers AMT and I pay a ton more taxes. Any advice would be appreciated!!!

 

[Drmdcpa]

They are not Schedule A. They are either C or D.

 

[maineken]

Thanks for your reply. The IRS says it should be on Line item 23 "Other Income" on the Schedule A, as it cannot be placed on Schedule C or D as the business has been closed. However, my CPA says it should also be on Schedule A, but line 28 "Other Misc Deductions" as Line 23 is the total amount you paid to produce or collect taxable income and manage or protect property held for earning income. That is not the case. Line 23 triggers AMT, Line 28 does not. Hope that helps.

 

[Drmdcpa]

If you know the answer, and deny other responses, why do you ask the question?

I would propose these are not personal expenses and thus do not go on schedule A since your were not an employee.

I would further propose if you were a sole prop, they are schedule C expenses, if a corporation - schedule D, if a partnership - schedule E page 2.

I would also propose you find a new CPA preferably one familiar with section 162 and business activities.