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and certain other miscellaneous items. The $881,226.03 was
disbursed by Howard to Ragatz out of the trust account.
The details of the disbursement to Mangum are not in the
record.
Petitioners did not report their punitive damages awards as
taxable income on their respective 1992 tax returns, although the
Benci-Woodwards and the Mangums disclosed the awards on their
returns. In addition, petitioners did not report in full their
interest on punitive damages on their respective 1992 returns.
Respondent timely issued notices of deficiency to
petitioners. Among other adjustments, respondent determined that
punitive damages and related interest were fully includable in
petitioners' gross income pursuant to section 61. Petitioners
have since conceded that their punitive damages, and related
interest, are includable in gross income in the amounts
determined by respondent. See O'Gilvie v. United States, 519
U.S. 79 (1996).
Respondent also determined that the Benci-Woodwards, the
Mangums, and the Ragatzes were entitled to miscellaneous itemized
deductions, subject to the 2-percent floor provided by section
67(a), for attorney's fees and costs attributable to the punitive
damages awards in the amounts of $670,135, $626,448, and
$609,767, respectively. However, for AMT purposes, respondent
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