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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
employees.--
(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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