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Income Tax Regs. R therefore determined that Ps were
required to treat the payment as an itemized deduction,
rather than a deduction in computing adjusted gross
income. Such an itemized deduction is disallowed as a
deduction under I.R.C. sec. 56(b)(1)(A)(i) in computing
income subject to alternative minimum tax under I.R.C.
sec. 55.
Held: Amounts paid by a former employer to a
former employee in settlement of his wrongful
termination claim fail to satisfy the first requirement
for an accountable plan, the “business connection”
requirement of I.R.C. sec. 62(a)(2)(A) as set forth in
sec. 1.62-2(d)(1), Income Tax Regs.; the payment to Ps’
attorneys is included in Ps’ gross income and is treated
as an itemized deduction.
David M. Kirsch, for petitioners.
Julie A. Fields, for respondent.
OPINION
BEGHE, Judge: This case is before the Court fully
stipulated under Rule 122.1 Respondent determined a deficiency
of $97,833 in petitioners’ 1996 Federal income tax. The issue
for decision is whether petitioners may treat a certain
attorney’s fee as paid under “a reimbursement or other expense
allowance arrangement” as defined in section 62(a)(2)(A) and (c)
so as to be excluded from gross income or deducted in arriving at
adjusted gross income under section 62(a). Respondent contends
1All Rule references are to the Tax Court Rules of Practice
and Procedure, and all section references are to the Internal
Revenue Code in effect for the year at issue, unless otherwise
specified.
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Last modified: May 25, 2011