Law Offices--Richard Ashare, P.C. - Page 21

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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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