T.C. Memo. 2001-127
UNITED STATES TAX COURT
ANDREW S. AND LINDA HAYWORTH BRENNER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13700-99. Filed June 4, 2001.
R determined that, for 1997, Ps were liable
for the alternative minimum tax computed, in part,
by adding back to Ps’ reported taxable income legal
fees incurred by P husband (H) and treated by Ps on
their original return as Schedule A miscellaneous
itemized deductions. See sec. 56(b)(1)(A)(i), I.R.C.
Ps argue that the legal fees (1) were reimbursed to H
by N as part of N’s payment in settlement of an
arbitration proceeding instituted by H and arising out
of N’s firing of H in 1996 and (2) are reimbursed
employee business expenses deductible from gross
income. See sec. 62(a)(2)(A), I.R.C.
Held: Because H failed to substantiate his legal
fees to N as required by sec. 1.62-2(c) and (e), Income
Tax Regs., N’s reimbursement of such fees is treated as
made under a nonaccountable plan. Therefore, they are
deductible only as miscellaneous itemized deductions.
See sec. 1.62-2(c)(3), (5), Income Tax Regs. R’s
deficiency determination is sustained.
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