118 T.C No. 29
UNITED STATES TAX COURT
FRANK AND BARBARA BIEHL, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 422-00. Filed May 30, 2002.
Ps are H and W. H, a shareholder and former
employee of D Corp., filed suit with W, also a
shareholder of D, against D and its other shareholders
for wrongful termination of H’s employment and for
dissolution of D. Following a jury verdict of $2.1
million in favor of H on his wrongful termination claim,
Ps and D negotiated a global settlement under which D in
1996 paid a total of $1.2 million to settle H’s wrongful
termination claim, $799,000 to H and $401,000 to Ps’
attorney; D settled Ps’ dissolution claims by agreeing
to buy back Ps’ shares in D in an installment sale with
payments scheduled to begin in 1997. Ps did not report
or disclose on their 1996 joint income tax return the
$401,000 payment to their attorney, on the ground that D
made the payment pursuant to “a reimbursement or other
expense allowance arrangement” under I.R.C. sec.
62(a)(2)(A) and sec. 1.62-2, Income Tax Regs. R
determined that the payment to Ps’ attorney had to be
included in Ps’ gross income and did not qualify as paid
pursuant to an “accountable plan” under sec. 1.62-2,
Page: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011