Guardianship and attorney fees

[Margaret CPA in OH]

Client has guardianship of father-in-law's assets. She pays nursing home bills and manages assets. She had to engage an attorney to get court processing completed and fil into home, etc. She also received a modest amount ($1160) in 2011 for these tasks.

Are the attorney fees and bond paid for guardian deductible? Guardian fees? I know estate planning by attorneys is a 2% itemized expense but not sure of others. In this case it literally doesn't matter as there is no taxable income but I would like to be sure of the principle. I also assume that her fees are taxable but not for SE.

Comments, guidance, answers welcomed!

[Margaret CPA in OH]

Anyone?

[Catherine]

Jeepers, Margaret -- that's a good one.

If there is a trust, then the amount allocable to taxable income are deductible. Without a trust.... I wonder if the legal fees could be considered a medical expense (required in order to provide needed services)? As for bond -- would that be a deduction from the $1160 income, if you client paid it? Taxable fees, yes, but not SE tax since she is not "in the business" of providing conservator services for hire and for profit, and is doing this as a kindness for family.

Guesses only; YMMV. Tried looking it up and had NO luck.

[jainen]

>>she is not "in the business"<<

That's the whole issue--since it is not a business, her expenses are only deductible as miscellaneous on Schedule A (to the extent of income, subject to the 2% threshhold). And then only legal fees whose primary purpose was to secure taxable income--costs to establish the guardianship and place the patient are not deductible at all.

[Margaret CPA in OH]

Thanks to both of you. There is no trust and the attorney fees are related to getting dil confirmed as legal guardian. I believe he also submits reports to the court as required. All fees were paid from fil assets. Dil paid nothing out of her own pocket.

Given the circumstances for each, as I wrote, there is no tax effect on either. Fil has relatively low income and medical bills wipe out taxable amount as he is in high level assisted living with huge pharmacy expense. Dil has 4 kids, disabled contractor husband, wages of $33,000 and no taxable income even with listing the $1160 received for paying fil bills, etc.

I was just looking for principles and references as I could find nothing on point either. Just a little mental exercise after the worst of a challenging season. Thanks again!