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the remaining 85 percent, and Sklar, Greenstein, and Scheer
received the balance of the settlement proceeds in accordance
therewith.5
On its return for 1993, petitioner deducted the $97,274 in
litigation costs paid. Leonard Bailin (Bailin), a certified
public accountant who prepared the return, was the accountant for
all claimants in the Prudential litigation for many years
including 1993. Bailin was aware that some of the litigation
costs were being paid by the petitioner because the other
claimants lacked funds and was aware that petitioner paid $97,274
in 1993. Bailin neither discussed with petitioner nor advised it
regarding the propriety of petitioner's deducting litigation
costs, and he merely assumed they were deductible to petitioner.
Respondent determined that the litigation costs of $97,274 were
not deductible to petitioner, or, in the alternative, that
petitioner could only deduct the share allocable to the plan.
5The claimants' attorneys also allocated the balance of
incurred but unpaid legal expenses to the claimants based upon
their collection percentage and deducted this amount from their
respective proceeds.
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