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petitioner’s legal fees and costs totaling $73,399.25 were
deductible as a miscellaneous itemized deduction, subject to the
2-percent floor under section 67. Respondent did not allow the
miscellaneous itemized deduction for legal fees in computing
petitioner’s alternative minimum taxable income. Thus, under
respondent’s determination, petitioner would be subject to
alternative minimum tax (AMT), under sections 55 and 56, of
$17,402. Petitioner contends that the $150,000 award is
excludable from income, or alternatively, if the award is not
excludable, the portion of the award paid as attorney’s fees is
excludable from income, and petitioner is not liable for AMT.
Excludability of Title VII Judgment Proceeds
We must first decide whether petitioner’s title VII judgment
proceeds are excludable from gross income. Except as otherwise
provided, gross income includes income from all sources. See
sec. 61(a); Commissioner v. Glenshaw Glass Co., 348 U.S. 426
(1955). Although section 61(a), concerning the inclusion of
income, has been broadly construed, statutory exclusions from
income have been more narrowly construed. See Commissioner v.
Schleier, 515 U.S. 323, 327-328 (1995); Kovacs v. Commissioner,
100 T.C. 124, 128 (1993), affd. without published opinion 25 F.3d
1048 (6th Cir. 1994).
One such statutory exclusion appears in section 104(a)(2).
Under section 104(a)(2), gross income does not include “the
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