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The problem is that Turbo Tax led me to Schedule A this year

Turbo Tax is stupid.

I don't mean that in a judgemental sense. It's just a fact. TT can only ask a limited set of questions, and only process certain responses to those questions. Granted, it can ask a lot of questions. But it is still a limited set.

On the other hand, people can ask an infinite variety of questions. They can tailor questions based on responses to previous questions. They can rephrase questions when a question is not fully understood.

So when using Turbo Tax (or any other tax software for that matter), it is up to you to understand the questions it's asking. And it's up to you to understand why the questions are being asked.

And, to your credit, you are attempting to do just that.

To get back to your statement, I suspect you answered a question somewhere about legal expenses. And the way you answered it caused TT to determine the legal expenses were personal rather than business. And that is where the error lies.

and I get the feeling I should have used Schedule A in 2005 instead of treating the attorney fees as professional fees on Schedule E.

Nope. The more I think about it, the more certain I am that the legal expenses and the settlement belong on schedule E. That is the activity which generated the situation. So that is where the fall out of the legal actions is reported - both income and expense.

--Peter
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