Guido Ruggiero and Kristin Ruggiero - Page 15

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          petitioner's research and writing expenses were not incurred in             
          his capacity as an employee of UConn.10                                     
               We do not agree with petitioners' contention that the                  
          remitted fellowship proceeds should offset gross wages received.            
          Petitioner had an employment relationship with UConn which                  
          existed both prior to and subsequent to receipt of the                      
          fellowships, and the amount of gross wages received during the              
          year in issue was determined in accordance with this agreement.             
          Petitioner, by agreeing to remit a portion of the fellowship                
          proceeds to UConn, maintained the terms of this employment                  
          relationship, including full salary and related benefits.  We               
          conclude, therefore, that the amounts paid to petitioner by UConn           
          constitute wages in the full amount reflected on the Form W-2               
          issued by UConn.                                                            
               We now turn to the characterization of the fellowship                  
          proceeds.  The facts before us are not distinguishable from those           
          presented in Spiegelman v. Commissioner, supra, where we held               
          that fellowship proceeds are fully includable in the recipient's            
          gross income, unless some statutory exclusion is applicable.  Id.           
          at 405-406.  In this case, the fellowships were awarded to                  
          petitioner.  After being awarded the fellowships, petitioner                

               10  By claiming petitioner's fellowship expenses on Schedule           
          C rather than as employee business expenses on Schedule A,                  
          petitioners minimize the effects of the alternative minimum tax.            
          See Kant v. Commissioner, T.C. Memo. 1997-217.                              

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