Samuel had worked for Pearl, Inc., for 35 years when he was discharged and his position filled by a much younger person. He filed and pursued a suit for age discrimination and received an award of $1.5 million. Under the contingent fee arrangement with his attorney, one-third of the award was paid directly to the attorney, with the balance going to Samuel. Samuel reported $1million gross income on his tax return, but did not include the $500,000 paid to the attorney. The IRS audited Samuel's return and included the $500,000 contingency fee in gross income. At the same time, Samuel was allowed a miscellaneous deduction (subject to the 2% floor) for the fee paid to the attorney. The IRS adjustment caused a tax deficiency to be assessed for both the regular income and the AMT. Evaluate the results reached.
Paper#2988 | Written in 18-Jul-2015Price : $25