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MEGAN C ONLY............

Individual A red an

Customer Question
MEGAN C ONLY............ Individual A hired...

MEGAN C ONLY............

Individual A hired an Attorney for a lawsuit and won $40,000. Attorney will receive $15,000 from A for Attorney Fees.  Individual A will have a $15,000 expense to offset the $40,000 income. Individual A, I believe and let’s assume will have a 1099 for the $40,000 income.  Individual A is just an individual; not a Corporation, Trade or Business etc. The $40,000 is not wages or any type of earned income.

The income of $40,000 is reported on form 1040 line 21 as other income. The expense is report on Schedule A line 23 Mis 2% deduction.

Question:



  1. PROBLEM 1- My net from the award is $25,000 but this trigger and Alternative Minimum Tax of $19,000. Therefore my award will be only $6,000 instead of the $25,000. If I  take the two entries out  ($45,000 income and $15,000 Attorney Expense) the Alternative minimum tax is zero and has always been zero. With other triggers I actually loose other benefits and therefore should refuse the Award?

  2. http://apps.irs.gov/app/amt2013/assistant/process?execution=e1s1 this web site calculation  shows my AMT tax should be zero…???

  3. PROBLEM 2-The Attorney Expense of $15,000 on Form Schedule A line 23 is limited to 2% and therefore I am only receiving $9,000 of the expense.


I notice if I put the expense on 28 there is no alternative min. Tax….

I must be reporting this incorrectly….because there should be no Alternative Min. Tax…If I report Schedule A line 28 there is no 2% limitation and there is no alternative min. Tax.

Something is wrong because I should refuse the award since there is zero net GAIN..

I JUST I called Lacerte Tax Software and the IRS....they disclosed that Schedule A line 23 is only used for Attorney Fees when it has to do with keeping your job....ATTORNEY FEES not related to keeping your job should be reported on Line 28 therefore eliminating the Alternative Min. Tax....especially this is an award....like winnings in Gambling..This is a situation where I would want 4 opinions...

Submitted: 2 years ago.Category: Tax
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Answered in 1 hour by:
8/11/2015
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,885
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi,

...

No one seems to be picking this up, but if this was not a employment action, then you would not use Schedule A.

...

Use line 28

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Customer reply replied 2 years ago

PLEASE TO NOT REPLY TO ANY OF MY QUESTION...ESPECAILLY SINCE I ASK FOR ANOTHER PERSON ONLY..i HAVE TO CANCEL AND REPOST EACH TIME

Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
OK, if these are really the people you want ... Have at it.
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
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