Bobby E. Syphrett and Janice D. Syphrett - Page 10

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               Our reading of the Letter Agreement further supports our               
          conclusion, as does petitioners' reporting of the settlement                
          proceeds on their 1989 tax return.  The first paragraph of the              
          Letter Agreement states clearly that Mr. Syphrett, who is                   
          described as "the client" in the Stephens litigations, would                
          receive all of the benefits from the Stephens litigation, and               
          that Intrastate would receive none of the benefits from that                
          suit.  Petitioners' 1989 tax return reports the full amount of              
          the settlement as gross proceeds.  These documents, which                   
          evidence petitioners' intent and understanding at the time of the           
          events with the events, support the inclusion of the full amount            
          of the settlement proceeds in their gross income.                           
               We hold for respondent on the first issue.  In so holding,             
          we need not decide petitioners' alternative argument that they              
          may deduct the amount that Mr. Syphrett transferred to Intrastate           
          under either section 162 as an employee business expense or                 
          section 212.  Even if we were to side with petitioners on this              
          second issue, which we do not intend to do, petitioners could               
          only deduct the $497,667 amount only as a miscellaneous itemized            
          deduction, see secs. 62(a)(2)(A) and 67, and they would receive             
          no benefit from such a deduction in 1989 because they are subject           
          to the alternative minimum tax, see sec. 56(b)(1)(A)(i).                    
          Alexander v. Commissioner, T.C. Memo. 1995-51, affd. 72 F.3d 938,           
          946-947 (1st Cir. 1995).                                                    

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