The irs adjustment caused a tax deficiency

Reference no: EM131013497

Samual 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 too the attorney, with the balance going to Samual. Of the $1.5 million received, Samual included his net $1 million as gross income on his tax return; he neither took as gross income nor deducted the $500,000 paid to the attorney. The IRS audited Samual's return and included the $500,000 contingency fee in gross income. At the same time, Samual was allowed a miscellaneous intemized 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 tax and the AMT.

Evaluate the results reached.

Reference no: EM131013497

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