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1. Held: Ps' deductions for legal expenses
attributable to punitive damages are miscellaneous
itemized deductions, deductible to the extent they
exceed 2 percent of adjusted gross income. Sec. 67,
I.R.C; sec. 1.67-1T(a)(1)(ii), Temporary Income Tax
Regs., 53 Fed. Reg. 9875 (Mar. 28, 1988).
2. Held, further, miscellaneous itemized
deductions for legal expenses related to punitive
damage awards are not allowed for purposes of
calculating AMT. Sec. 56(b)(1)(A)(i), I.R.C.;
Alexander v. Commissioner, 72 F.3d 938 (1st Cir. 1995),
affg. T.C. Memo. 1995-51, applied.
3. Held, further, Ps' gross income includes their
punitive damage awards unreduced by attorney's fees
(and costs). Cotnam v. Commissioner, 263 F.2d 119 (5th
Cir. 1959), affg. in part and revg. in part 28 T.C. 947
(1957), distinguished.
Philip Garrett Panitz, for petitioners.
Mark A. Weiner, for respondent.
MEMORANDUM OPINION
NIMS, Judge: In these consolidated cases, respondent
determined the following deficiencies with respect to the Federal
income taxes of petitioners Ivor F. and Debra A. Benci-Woodward
(the Benci-Woodwards), Laurentz J. and Barbara Mangum (the
Mangums), and Jose and Dianne M. Ragatz (the Ragatzes):
Docket No. 3769-96
(the Benci-Woodwards)
Year Deficiency
1992 $321,002
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