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prepared sometime in 1997, could not have contained more than a
fraction of the $600,000 estimated total legal fees as the final
amount was not known until all of the various legal proceedings
had been completed in late 1998.
Mr. Maitland testified, and we have found, that (1) he and
petitioner did not discuss how the settlement payment would be
allocated among the claims made by petitioner, and (2) he did not
intend any part of the settlement payment to be for any
particular claim that petitioner had made.
Pursuant to the settlement agreement, Nomura made the
settlement payment and petitioner released Nomura from liability
for all existing claims, including any claim for present or
future legal expenses. To enter into the settlement agreement,
Mr. Maitland and, by him, Nomura did not require of petitioner
any accounting from him of his legal expenses. Nomura did not
attempt to enforce any substantiation requirement that may have
been implicit in Article XIII. More importantly, petitioner did
not substantiate his legal expenses to Nomura in any sense other
than, perhaps, telling Mr. Maitland that his claim was based in
part on legal expenses of $600,000. Even if that did occur, it
is not an accounting sufficient to satisfy section 1.62-2(e)(3),
Income Tax Regs.
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