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expenses, and respondent applies that testimony to conclude that
Mr. Ashare was overcompensated in each of the years relevant
herein and entitled to no compensation for 1993. Respondent
notes that 1993 was the last year from which petitioner could
carry back an NOL to 1990 to recover the Federal income taxes
paid for that year, see sec. 172(b)(1) (a carryback of an NOL
such as the one at hand is limited to the prior 3 years), and
argues that the main reason for the $1,750,000 payment was to
recover those taxes. Respondent notes that petitioner had a
significant deficit in retained earnings on December 31, 1993.
We agree with petitioner that it may deduct the $1,750,000
because it paid the amount to Mr. Ashare to compensate him for
work on the Gentile case. Up until the time that the Gentile
case was settled in 1989, Mr. Ashare, on behalf of petitioner,
had performed significant services on that case to entitle the
class to receive the $70 million settlement payment. Afterwards,
petitioner, and hence, Mr. Ashare, was obligated to perform
significant services in administering the proper disposition of
that $70 million payment. But for Mr. Ashare, petitioner never
would have received the $12,567,623 of legal fees in the first
place. But for Mr. Ashare, petitioner would never be able to
dispose of the settlement funds properly. Given the necessity
and indispensability of Mr. Ashare's services on the Gentile
case, we do not believe it unreasonable to conclude, as we do,
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