Can my husband claim $17,000 in money lost?

Question

Ok, I'm going to explain this as simple as I can. About 1 year ago my husband had to pay off a debt that his ex wife made after the divorce. The debt came back onto his property, and he had to pay it to clear the property. Now the debt was not his in any way, his name was not asscoiated with this in any way shape or form.
He was wondering, can he claim this $17,000 as a loss to him? He has documentation showing that he had paid the debt, lawyer fees and everything. Can anyone shine some light on this?

Answer 1

No, that's not deductible. Uninsured casualty losses are deductible in some circumstances. That would include such things as flood damage that wasn't insured or a burglary loss that wasn't insured, etc. But paying off a debt against a piece of property does not qualify as a casualty loss. Sorry.

Answer 2

The answer is no. I beleive he can adjust the basis in the property. If he paid $100,000 for the property and then paid the debt off to remove the liens, when he sells the property he can adjust the value he paid for the property to $117,000 plus any other capital improvements. This will lower his tax burden upon the future sale of the property, but not prior to the sale. Of course, be prepared to provide documentation.

Answer 3

I'm thinking if he had to pay the debt to clear his property, it is a loss for him. I would argue that he claim it, if he has the documentation that shows what it was for and why he paid it.

Answer 4

Unfortunately, no, not on his income taxes. Depending on circumstances, he might or might not be able to add that payment to the basis of the property. He should consult a CPA at such time as he sells it, to find out for sure.

Answer 5

No.