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Even if Estate of Clarks v. United States, supra, had not
recently been decided in the taxpayer’s favor by the Court of
Appeals for the Sixth Circuit, it would be appropriate to revisit
this issue. That Congress has not yet responded to comments that
the itemized deduction and AMT provisions are working in
unanticipated and inappropriate ways that support revision or
repeal18 does not mean that courts are powerless to step in on a
17(...continued)
should exceed approximately 72-73 percent of the gross recovery
and be treated as itemized deductions, of resulting in AMT
liability--assuming the taxpayer has no substantial other income
in the year of recovery--that would exceed the amount of the net
recovery. A case in point may be Jones v. Clinton, 57 F. Supp.
2d 719 (E.D. Ark. 1999) in which, after acrimonious dispute among
three sets of attorneys, $649,000 of the settlement proceeds of
$850,000 were divided among them (the settlement check was made
payable to plaintiff and two sets of attorneys), so as to leave
only $201,000 for the plaintiff. See “Attorneys For Jones
Escalate Fight Over Fees”, Washington Times A6 (1/17/99); “Jones’
Lawyers Battle Over Fees”, Washington Post A9 (1/20/99); “Sharing
Jones Settlement”, N.Y. Times A16 (3/5/99); see also Alexander v.
IRS, 72 F.3d 938, 946-947 (1st Cir. 1995), affg. T.C. Memo. 1995-
51, in which the allocated legal fee approximated 73-74 percent
of the total recovery, and the fee and the tax liability on it
appeared to exceed the net taxable recovery.
18 See, e.g., Gutman, “Reflections on the Process of
Enacting Tax Law”, Tax Notes 93, 94 (Jan. 3, 2000) (Woodworth
Lecture, delivered Dec. 3, 1999) (itemized deduction phaseouts);
IRS National Taxpayer Advocate’s Annual Report to Congress, BNA
Daily Tax Report GG-1, L-2 (AMT), L-9/10, L-22 (itemized
deductions) (Jan. 5, 2000); Meissner, “Repeal or Revamp the AMT:
The Time Has Come”, 86 Stand. Fed. Tax Rep. (CCH) Tax Focus (Aug
19, 1999); Testimony of Stefan F. Tucker on Behalf of Section of
Taxation, American Bar Association, before Subcommittee on
Oversight, U.S. House of Representatives, on Revenue Provisions
in the President’s FY 2000 Budget, Mar. 10, 1999, 52 Tax Law.
577, 580-581 (1999) (AMT and itemized deductions);
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