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factually distinguishable because the Boccardo law firm received
a flat percentage (gross fee arrangement) of the client’s
recovery. The Boccardo law firm was entitled to the fee if the
client recovered, but it was not entitled to reimbursement of the
litigation costs “off the top” or before computing its percentage
fee. By contrast, a net fee arrangement would normally permit
reimbursement of the costs before computing the percentage fee.
P&G’s fee arrangement did not involve either a gross or net fee
arrangement. P&G’s fee, which was paid by CSAA, was billed at a
stated hourly rate, not on any form of contingency basis.
Therefore, payment of P&G’s fees and reimbursement of litigation
costs were on a dollar-for-dollar basis. P&G’s factual situation
is clearly distinguishable from that of the law firm in Boccardo.
Ultimately, the litigation costs in this case were not a burden
on P&G or a reduction of P&G’s fee income received from CSAA for
legal service rendered.
Petitioner advanced additional arguments with respect to the
reimbursed expenses and litigation costs. Petitioner argued that
respondent is estopped from denying the deductibility of the
litigation costs because petitioner relied on the contents of an
Internal Revenue Service publication entitled “Business Expenses
for 1988” (publication). The publication contains the following
statement, at 3:
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