Frank and Barbara Biehl - Page 2

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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.                                       


               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              

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