Andrew S. and Linda Hayworth Brenner - Page 17

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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           
               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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