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  3. samual had worked for pearl inc, for 35 years when

Samual had worked for Pearl Inc, for 35 years when he was discharged, and his...

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Accounting

Samual had worked for Pearl Inc, for 35 years when he was discharged, and his position filled by a 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. Of the $1.5 million received, Samual included his net $1 million as a gross income on his tax return and included the $500,000 contingency fee in his gross income. At the time, Samual wa allowed a miscelaneous itemnized 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.

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