Legal and professional expenses that produce long-term benefits are non-deductible capital expenses that are included in the cost of ownership. The proof of the origin of the claim determines if a legal expense is related to an ordinary and necessary business activity or to a capital asset. There is no definitive answer to this question, as it may vary depending on the jurisdiction in which the construction project is carried out. However, as a general rule, legal fees associated with the construction process are considered capital expenses.
This means that they can be capitalized on the construction company's balance sheet and amortized over time. For accounting purposes, U.S. GAAP requires the company to bear transaction costs in the period incurred. For tax purposes, a company may be allowed to capitalize transaction costs and amortize them over the useful life of the asset or a specified period.
