Discussion:Debt relief fee
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Discussion Forum Index --> Basic Tax Questions --> Debt relief fee
Discussion Forum Index --> Tax Questions --> Debt relief fee
| 11 April 2009 | |
| Have a client that used a debt relief company to consolidate their debt. They paid a fee to the company, would this fee be tax deductible? | |
| 11 April 2009 | |
| That's what I am thinking....client asked if it would be, so I am checking. | |
| 12 April 2009 | |
| Actually, having thought it over why wouldnt it be... the fee produced income (debt relief). WHy wouldnt the fee be considered investment expense subject to 2%? Investment fees paid are deductible if they are paid in an attempt to generate income. THe debt consolidation company created income by getting debt relief. | |
| 12 April 2009 | |
| Taxking, you are seeing the big picture, but only judges can do that.
I'd take a look at the statutory language very carefully, and give the words their dictionary interpretation (narrow). Maybe there are some TC cases that have dealt with the definition of investment. I would guess that a judge would hold that the primary purpose of the advice was to reduce the debt, and that the generation of income was a necessary nuisance. No one wants to generate this kind of income. | |
| 12 April 2009 | |
| Be happy to, Crow. Loan me $100 and then hit me with the 1099-c. I'll be happy to pay the gov't its fair share. | |
TheTinCook (talk|edits) said: | 12 April 2009 |
| A cursory reading of §121 and §1.121-1 does not seem to offer any grounds for parsing it based on the "nuisance" income. | |
| 12 April 2009 | |
| lol. What I'm saying is that it's not investment advice... the man's primary purpose is not to generate this income when he hires the debt adjuster. Now, of course, in the bigger picture, I think Taxking has a point: paying off a debt can be an excellent investment. | |
| 12 April 2009 | |
| And when you reward bad behavior you get more bad behavior. | |
| April 12, 2009 | |
| Was there any taxable income due to the debt relief? If so, you might want to read the following:
http://www.irs.gov/publications/p529/ar02.html#en_US_publink100026974 | |
| April 12, 2009 | |
| Legal fees related to producing taxable income are deductible on Sch A, subject to 2% of AGI. | |
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