Deducting expenses from failed purchase

[Jim S.]

I recently had a deal fall through as a result of major inspection issues. I had already requested an appraisal + loan application fee + was using an attorney so overall I'll be ~$2k in the hole.

I'm fine with that, better than getting stuck with a money pit for 20 years. My question is can I deduct these expenses somehow?

I have one rental property in Colorado, this purchase was in upstate NY. I intend to buy a different property in upstate NY instead.

Is there a way to either generically write off this loss or  less preferably add to the basis for another subsequent property in same part of upstate NY?

[Dmitriy Fomichenko]

Jim, sorry to hear that your deal fell through but I'm glad you made the decision to get out and cut your losses early. 

I would definitely follow Frank's advice above and get a good CPA who works with investors and investor himself on your team.

As far as his other advice I don't think this would be the right thing to do. Those expenses are not related to your rental and if you get audited it will not fly. If you had a real estate investing company then you would be able to deduct those expenses but I don't see how you can do it legitimately on your Schedule E now. However, I'm not a CPA and would defer to @Brandon Hall to provide his expert opinion if he can.