Abortive legal fees deductible on sale?

Abortive legal fees deductible on sale?

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I have a client who has been trying to sell a piece of land since 2008. Over the years they have had interested parties with whom negotiating of contracts have started only for the buyers to pull out at the last minute.  Significant legal fees have been incurred in respect of these aborted sales.  The land has now been sold and I am completing the tax return. For the purposes of capital gains tax can the legal fees that were incurred in respect of the abortive sales be deducted from the proceeds?

TCGA 1992, S.38(1)(c) states that incidental costs of disposal are limited to expenditure wholly & exclusively incurred for the purposes of the disposal. Although they don’t relate to expenses incurred in relation to the final disposal, the expenses are associated with disposing of the land and therefore could be argued as allowable?

I would be grateful of the opinion of other AW members.

Many Thanks

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By duncanedwards
20th Aug 2014 17:47

I doubt it, I'm afraid

Obviously they are not an enhancement cost and they aren't (by definition) costs of disposal.

That's a bit of a generalisation.  Were any of the abortive costs ones relating to services that didn't need to be repeated for the sale ultimately achieved?  Those ought to be allowable.

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By jon_griffey
20th Aug 2014 18:17

That is what is known as a 'tax nothing'.

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