Andrew S. and Linda Hayworth Brenner - Page 9

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          Petitioners’ Tax Reporting                                                  
               Petitioners timely filed a Form 1040, U.S. Individual                  
          Income Tax Return, for 1997 (the original return).  On the                  
          original return, petitioners treated the legal fees (in the                 
          amount of $215,3541) as a miscellaneous itemized deduction.  On             
          May 20, 1999, petitioners submitted a Form 1040X, Amended U.S.              
          Individual Income Tax Return (the amended return), on which                 
          petitioners treated the legal fees as a deduction in arriving at            
          adjusted gross income.                                                      
          Respondent’s Adjustment                                                     
               As a result of his examination of the original return,                 
          because petitioners had deducted the legal fees as a                        
          miscellaneous itemized deduction, respondent added back the legal           
          fees to petitioners’ reported taxable income in respondent’s                
          computation of petitioners’ alternative minimum taxable income              
          subject to alternative minimum tax.                                         

               1  Of the $215,354 petitioners claimed as a miscellaneous              
          itemized deduction on the original return, $178,993.37 was paid,            
          in part, in connection with the arbitration proceeding and, in              
          part, in connection with the injunction motion, and $36,314.90              
          was paid in connection with the NYSE and NASD investigations.               

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Last modified: May 25, 2011