Thomas E. & Dorothy J. Ross - Page 4




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          incorrectly deducted the legal and accounting fees as                       
          miscellaneous itemized deductions.  They claim the fees should              
          have been deducted directly from the trust income, or, in other             
          words, from gross income, in the same manner that business or               
          rental property expenses are directly deducted from business or             
          rental income, respectively.  Petitioners allege that if they had           
          reported the fees in this manner, then the AMT would not apply.             
          In their memorandum, petitioners contended that the application             
          of the AMT to their situation is not fair and was not intended by           
          Congress, but they did not pursue this argument at trial.                   
               The alternative minimum tax is imposed on taxpayers under              
          section 55.  The determination of an individual's alternative               
          minimum tax requires a recomputation of the taxable income                  
          leading to a new tax base, the alternative minimum taxable                  
          income.  Sec. 55(b)(2).  In computing the alternative minimum               
          taxable income, no deduction is allowed for miscellaneous                   
          itemized deductions as defined in section 67(b).  Sec. 56(b)(1).            
               Section 212 allows an individual a deduction for all the               
          ordinary and necessary expenses paid or incurred during the                 
          taxable year for the production or collection of income or for              
          the management, conservation, or maintenance of property held for           
          the production of income.  Sec. 212(1) and (2).  The legal and              
          accounting fees in this case are such expenses.  Burch v. United            
          States, 698 F.2d 575, 579 (2d Cir. 1983) (taxpayer allowed                  





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