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C. Respondent
Respondent argues as follows: The settlement payment was
intended by Nomura as a lump-sum payment in settlement of all
claims by petitioner against Nomura. No portion may be found to
discharge any particular claim in the arbitration proceeding such
as the claim for attorney’s fees. Even if it were assumed that
part of the settlement payment was intended as reimbursement of
the legal fees, such fees were not reimbursed pursuant to an
employee expense reimbursement plan covered by section
62(a)(2)(A). Petitioners were correct on the original return,
and payment of the legal fees is a miscellaneous itemized
deduction, which, on the facts of petitioners’ return, causes an
alternative minimum tax liability.
II. Discussion
A. Necessary Findings
In order for petitioners to prevail, we must find that
Nomura both intended at least $215,354 of the settlement payment
as reimbursement of the legal fees2 and made such reimbursement
pursuant to a reimbursement arrangement. To make the second
finding, we must find both that Article XIII is a reimbursement
2 See, e.g., Stocks v. Commissioner, 98 T.C. 1, 10 (1992):
“If the settlement agreement lacks express language stating what
the settlement amount was paid to settle, then the most important
factor * * * [in making that determination] is ‘the intent of the
payor’ as to the purpose in making the payment.”
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