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  • 1.  Real Estate LLC expense

    Posted 03-22-2023 04:01 PM

    Hello

    A Client has a Real Estate LLC (disregarded entity) which owns and rents commercial property. The Client found out that the seller of the property misrepresented the permitted amount of rental space (apartments) and in 2013 commenced suit against the seller.  In 2022 the parties settled with the client receiving a lump sum payment of $250,000. Client paid the attorney a $25,000 legal fee.

    In 2013 client paid $195,000 to purchase transfer of development rights, which wasn't depreciated, in order to achieve the original represented yield.  

    I understand the settlement proceeds are taxable income but can I deduct the $195,000 paid for TDR as against the settlement?

    Thanks in advance.

    Joe Sgroi



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    Joseph A. Sgroi
    JOSEPH A. SGROI, CPA
    ST JAMES NY
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  • 2.  RE: Real Estate LLC expense

    Posted 03-23-2023 01:43 AM

    From what you have explained, there is nothing in what took place that would qualify as any type of involuntary conversion, or tax-free exchange like under sec 1031 so I can't see  of any reason this series of transactions would qualify as an offset or tax free,,They are two separate transactions.



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    Howard Silverman
    Enrolled Agent
    silvermantaxconsult@gmail.com
    516-302-5455
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    Original Message


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