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MEMORANDUM FINDINGS OF FACT AND OPINION
BEGHE, Judge: Respondent determined the following
deficiencies, late-filing additions, and accuracy-related
penalties with respect to petitioner’s Federal income tax:
Docket Addition to Tax Penalty
No. Year Deficiency Sec. 6651(a)(1) Sec. 6662
4448-97 1992 $244,563 $12,228 $48,913
1422-98 1993 247,317 12,366 49,463
1422-98 1994 61,965 --- 12,393
After concessions, the following issues are to be decided:
(1) Whether litigation settlement proceeds of $797,225 paid
to and placed in petitioner’s attorney’s trust account in 1992,
pending resolution of a fee dispute between petitioner and his
attorney, should be reported as income on petitioner’s 1992
individual income tax return, or whether the amounts should be
reported as income only when paid from the trust account in later
years. We hold that the settlement proceeds were income to
petitioner in 1992.
(2) Whether petitioner is entitled to deduct under section
461(f)2 amounts placed in his attorney’s trust account pending
resolution of the fee dispute between petitioner and his
attorney. We hold that petitioner is entitled to deduct the
2Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years at issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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Last modified: May 25, 2011