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Petitioners are subject to the alternative minimum tax for
1989.
Discussion
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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