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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