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OPINION
I. Introduction
A. Issue
We must determine whether petitioners have any alternative
minimum tax liability on account of their payment, and deduction,
of the legal fees.
B. Petitioners’ Argument
Petitioners argue as follows: They erroneously reported
the legal fees as a miscellaneous itemized deduction from
adjusted gross income on the original return. Of the settlement
payment, $600,000 was intended by Nomura as reimbursement of
petitioner’s legal expenses. That amount was paid to him
pursuant to Nomura’s bylaws, Article XIII. Article XIII
constitutes “a reimbursement or other expense allowance
arrangement”, as that term is used in section 62(a)(2)(A)
(without distinction, a reimbursement arrangement). The legal
fees (the $215,354 expended in 1997) were, therefore, deductible
from gross income in the determination of adjusted gross income
pursuant to that section. As a so-called “above the line”
deduction, such legal fees were not subject to “add back” in the
determination of alternative minimum taxable income. See sec.
56(b).
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Last modified: May 25, 2011