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The attorney’s fee Mr. Biehl incurred is deductible under
section 162(a). Mr. Biehl was in the trade or business of being
an employee of NCMI, and the transaction that was the subject of
the lawsuit, NCMI’s termination of his employment, arose in the
context of Mr. Biehl’s trade or business. The attorney’s fee
NCMI paid to Mr. Biehl’s attorney satisfies the threshold
requirement of section 62(a), that the fee be deductible under
section 162(a). We therefore must scrutinize the attorney’s fee
under the business connection requirement of section 62(a)(2)(A)
and the accountable plan regulations.
Business Connection Requirement
A deductible expense satisfies the business connection
requirement only if it was “paid or incurred by the employee in
connection with the performance of services as an employee of the
employer.”11 Sec. 1.62-2(d)(1), Income Tax Regs.; see also sec.
11We note that in Brenner v. Commissioner, T.C. Memo. 2001-
127, we stated that expenses that “arose out of * * * [the
taxpayer’s] prior employment” satisfied the business connection
requirement. That conclusory statement was obviously not
intended to be a complete expression of the business connection
requirement and the conditions for its satisfaction. Our
statement was merely one of a series of assumptions by the Court
in order to decide whether the taxpayer properly substantiated
his expenses to his former employer. The statement was dictum
because the Court had previously stated, in setting forth the
basis on which it was deciding the case:
We shall deal first with the question of whether
* * * [the employer] reimbursed the legal fees
pursuant to, and in accordance with, Article XIII.
Since, as we shall explain, we cannot make that
(continued...)
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