Sandra Holmes - Page 2




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               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code in effect for 2001, and Rule references           
          are to the Tax Court Rules of Practice and Procedure.                       
               After settlement of some issues by the parties, the issue              
          for decision is whether petitioner for 2001 is entitled to deduct           
          legal fees.                                                                 

                                  FINDINGS OF FACT                                    
               At the time the petition was filed, petitioner resided in              
          New York, New York.                                                         
               In 1994, using an attorney, petitioner filed in Federal                
          District Court a lawsuit against petitioner’s employer alleging             
          sexual harassment and discrimination.  In 1996, the District                
          Court dismissed petitioner’s lawsuit.  In 1997 the United States            
          Court of Appeals for the Second Circuit affirmed the dismissal.             
          Holmes v. NBC, GE, 946 F. Supp. 2 (S.D.N.Y. 1996), affd. without            
          published opinion Holmes v. NBC/GE, 133 F.3d 907 (2d Cir. 1997).            
               The specific terms of the fee agreement between petitioner             
          and her attorney are not established in the record.                         
               In 2001, even though petitioner’s Federal sexual harassment            
          and discrimination lawsuit had been dismissed against petitioner            
          several years earlier, petitioner’s attorney continued attempts             
          to recover for petitioner damages relating to alleged sexual                
          harassment and discrimination.  The record does not indicate that           
          petitioner ever recovered any amount of damages relating to                 






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