Appellate Law & Practice

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Monday, November 22, 2004

Assignment of Income, Contingent Fees, and all that.

Thanks to the Scotusblog, I now know that the oral argument in CIR v. Banks and Banaitis, No. 03-907 is available here. The issue is one near and dear to the hearts of attorney, whether under 26 USC Sec. 61, contingent fees paid to lawyers are excludable from gross income?

The Sixth Circuit (Banks) and the Ninth Circuit (Banaitis) stand together in the minority and hold that, in the words of the amicus brief filed by Brant Hellwig & Gregg Polsky:


...a contingent fee arrangment is as a present transfer to the attorney of a portion of the underlying cause of action. These latter courts conclude that the contingent fee paid to the attorney represents a liquidation of the attorney's portion of the claim.
See The Tax Prof Blog's Coverage here and law.com's coverage here. And, if you think that you are getting off easy, remember to read the Tax Court's opinions in Banaitis and Banks.

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