- 8 - Petitioners argue that Congress never intended legal expenses attributable to punitive damages to fall within the category of miscellaneous itemized deductions. In that connection, petitioners maintain that Since punitive damage awards were not definitively determined to be taxable until recently, there was no prior need for a determination that attorney fees should be allowed as an itemized deduction excluded from the miscellaneous itemized deduction "catch-all" of section 67(b). Petitioners cite no authority in support of their proposition, and their argument is, in fact, untenable. The treatment of legal expenses attributable to punitive damages as miscellaneous itemized deductions results from the purely mechanical application of section 67. Moreover, such treatment accords with the treatment of legal fees attributable to damages awarded in, or settlements connected with, contractual disputes, for example, which have always been subject to tax. Alexander v. Commissioner, 72 F.3d 938 (1st Cir. 1995), affg. T.C. Memo. 1995- 51; see also Brewer v. Commissioner, T.C. Memo. 1997-542 (holding that a deduction for legal fees attributable to settlement of Title VII gender discrimination suit is a miscellaneous itemized deduction subject to the 2-percent floor); Glassman v. Commissioner, T.C. Memo. 1997-497 (holding that section 212Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
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