Andrew S. and Linda Hayworth Brenner - Page 12

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          arrangement and that Nomura reimbursed the legal fees pursuant              
          to, and in accordance with Article XIII.                                    
               We shall deal first with the question of whether Nomura                
          reimbursed the legal fees pursuant to, and in accordance with,              
          Article XIII.  Since, as we shall explain, we cannot make that              
          finding, we need not consider in any detail the remaining                   
          required findings, since petitioners cannot prevail.  For the               
          sake of argument, however, we shall assume that Nomura intended             
          $600,000 of the settlement payment as reimbursement of the legal            
          fees and Article XIII, on its face, qualifies as a reimbursement            
          arrangement for the reimbursement of such fees.                             
               B.  Section 62(a)(2)(A) and (c)                                        
               In pertinent part, section 62(a) provides:                             
               [T]he term “adjusted gross income” means * * * gross                   
               income minus the following deductions:                                 
                         *  *  *  *  *  *  *                                          
                    (2) Certain trade and business deductions of                      
                         (A) Reimbursed expenses of employees.--The                   
                         deductions allowed by part VI (section 161                   
                         and following) which consist of expenses paid                
                         or incurred by the taxpayer, in connection                   
                         with the performance by him of services as an                
                         employee, under a reimbursement or other                     
                         expense allowance arrangement with his                       
                         employer.  * * *                                             
               In pertinent part, section 62(c) provides:                             
               (c)  Certain arrangements not Treated as                               
               Reimbursement Arrangements.--For purposes of subsection                
               (a)(2)(A), an arrangement shall in no event be treated                 

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