- 9 - not “contracted bona fide and for an adequate and full consideration in money or money’s worth.” The Stern estate paid the deficiency and sued for a refund in the U.S. District Court, Southern District of Indiana. In September 1997, the District Court held that petitioner’s claim against the estate was deductible. C. Petitioners’ 1993 Return On their 1993 return, petitioners reported one-half ($91,250) of the amount petitioner received in satisfaction of her claim as income from wages, salaries, tips, etc. Petitioners did not report the other one-half of the award ($91,250) as income or deduct any of their expenses of caring for Mr. Stern. OPINION A. Whether Certain Payments From the Stern Estate Were Nontaxable Reimbursements of Petitioners’ Expenses Respondent contends that the $182,500 that petitioners received from Mr. Stern’s estate in 1993 was compensation for their services to Mr. Stern, and that petitioners may not deduct their expenses on behalf of Mr. Stern because petitioners paid those expenses in prior taxable years.2 Respondent also contends that the expenses were not deductible under section 162 and were personal expenses under sections 262 and 263. 2 Respondent concedes that petitioners may deduct $17,138 of their expenses in 1993. Consequently, respondent contends that petitioners underreported their 1993 income by $74,112 ($91,250 minus $17,138).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011