Legal fees to Retitle rental property

[jgcpa]

I have a client who purchased Rental property in her name. She paid Legal Fees to Transfer the Title of the Rental Property to her Revocable Trust. Are those legal fees deductible on Schedule E? Or more of a personal expense?

[IRonMaN · Accepted solution]

Sounds like a personal expense to me.

[jgcpa]

Thank you for your reply. Just to clarify, the purchase of rental property remained rental property. Does that change your answer?

[IRonMaN]

Nope.  Changing the name on the title had no effect on rental operations - it was for personal reasons not business reasons.

[BobKamman]

Why didn't she put it in the trust in the first place?  She hadn't been conned into thinking she needed a trust yet?  Estate planning, whether needed or not, is a personal expense.  Just because it's income property doesn't mean the transfer is income-related.  

Next year she'll be back transferring it to an LLC.  Because, well, everyone else does it, right?  (Except in California.)  

[Anglis]

How do you remove the rental property from Schedule E on personal return, when transferrring to a irrevocable trust. The family owner has dementia, so they are trying to protect the rental. It is still commercial rental property. I am only removing from personal return, she has someone doing the trust return. I do not have any experience with irrevocable trusts.

Thank you

Angela

[jgcpa]

A transfer of property in personal name to an irrevocable trust is a Gift. Report the gift on Form 709 and then the rental income/expenses on form 1041. Look for a K-1 if any from the trust.