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treatment to NCMI would be the same whether it issued one Form
1099 or two Forms 1099; in either case NCMI would have a
deductible expense of $1.2 million. The Superior Court granted
the motion, but the record does not indicate whether one or two
Forms 1099 were actually filed with respondent.
On their Form 1040, U.S. Individual Income Tax Return, for
1996, petitioners included in gross income the $799,000 NCMI
directly paid to Mr. Biehl but did not report or disclose the
$401,000 payment to Olimpia, Whelan, & Lively. Respondent
determined in the statutory notice that petitioners should have
also included in gross income and adjusted gross income the
$401,000 that NCMI paid directly to their attorneys.
Respondent’s explanation of adjustments in the statutory notice
of deficiency goes on to state: “Alternatively, if it is
determined this income constitutes reimbursement, such
reimbursement was made under a nonaccountable plan and is
includible in gross income.” Respondent determined that in
either case petitioners would be entitled to a $401,000
miscellaneous itemized deduction from adjusted gross income.
Accordingly, respondent determined the deficiency in issue of
$97,833, primarily attributable to the AMT liability under
section 55 resulting from disallowance of the itemized deduction
under section 56(b)(1)(A)(i) in computing alternative minimum
taxable income.
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