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need not report on his tax return certain expenses “for which he
is required to account and does account to his employer”). The
latter condition (reporting) is not met here.
(2) Discussion
Article XIII requires the return of any reimbursements or
advances to the extent such payments exceed the amount to which
the person paid is entitled. We assume that some accounting is
required to implement that provision (which we assume would
satisfy the specification requirement of section 1.62-2(e)(3),
Income Tax Regs.). Nevertheless, we believe that the facts
establish that no accounting was made here, so that the actual
substantiation requirement of section 1.62-2(e)(3), Income Tax
Regs., is not met. At best, the facts establish only that
petitioner told Mr. Maitland that he would settle for $2 million
based, in part, on his legal fees. That is not substantiation at
all.
During his testimony, petitioner stated several times that,
in negotiating with Nomura, he justified his claim for $2 million
on the basis, in part, of his legal fees, which he estimated to
be in excess of $600,000. He testified that, at the second
settlement meeting, he told Mr. Maitland: “I expended a little
over $600,000 at that point [in legal fees], and that’s how I was
getting my number.” He also testified that neither he nor his
attorneys ever documented, to Nomura, legal fees in that amount.
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