- 19 -
other section of the Code. For an expense to qualify as being
paid under an accountable plan, it must be allowed as a deduction
under section 162(a). Sec. 1.62-2(d), Income Tax Regs.
Mr. Biehl’s attorney’s fee satisfies the threshold
requirement of deductibility under section 162(a). It is well
settled that the costs of a former employee’s prosecution of a
wrongful termination claim are deductible by him as a trade or
business expense under section 162(a). McKay v. Commissioner,
102 T.C. 465, 489 (1994), vacated and remanded on another issue
84 F.3d 433 (5th Cir. 1996); Alexander v. Commissioner, T.C.
Memo. 1995-51, affd. 72 F.3d 938 (1st Cir. 1995). Section 162(a)
allows a deduction for ordinary and necessary expenses incurred
in the course of carrying on a trade or business. A taxpayer may
engage in the trade or business of “being an employee”. O’Malley
v. Commissioner, 91 T.C. 352, 363-364 (1988).
In McKay v. Commissioner, supra at 489, we concluded that a
former employee’s attorney’s fees in a suit against his former
employer were “incurred in the course of carrying on * * * [the
taxpayer’s] trade or business” as an employee. Our conclusion
was based on the fact that the transaction subject to the
litigation “arose in the context of the taxpayer’s trade or
business”. Id. at 488 n.23; see also Alexander v. Commissioner,
supra.
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011