Bobby E. Syphrett and Janice D. Syphrett - Page 8

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               Petitioners are subject to the alternative minimum tax for             
               Petitioners argue primarily that the proceeds from the                 
          Stephens litigation were to be shared between Mr. Syphrett and              
          Intrastate, and that Mr. Syphrett transferred the $497,667 to               
          Intrastate to effectuate a "global allocation" of the proceeds of           
          the Stephens litigation and the Wiewall litigation.  Petitioners            
          argue alternatively that Mr. Syphrett paid the $497,667 to                  
          Intrastate to reimburse it for the following amounts that it paid           
          during and in connection with the Stephens litigation:  $112,245            
          for legal fees to attorneys other than Mr. Doherty, $349,072 for            
          part of Mr. Syphrett's salary and related payroll taxes, and                
          $36,350 for miscellaneous expenses.  Petitioners conclude with              
          respect to their alternative argument that they may deduct the              
          $497,667 amount as:  (1) An ordinary and necessary expense in               
          carrying on Mr. Syphrett's trade or business as an employee of              
          Intrastate, see sec. 162, or (2) an expense for the production or           
          collection of income, or the management, conservation, or                   
          maintenance of property held for the production of income, see              
          sec. 212.                                                                   
               Respondent counters that all of the settlement proceeds                
          belonged to petitioners, and that they transferred the $497,667             
          amount to Intrastate in an attempt to shelter this amount from              

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