Stuart Bronstein <spamtrap[at]lexregia.com> wrote:
- quote -

The Supreme Court's ruling actually mentions this situation.
The court declined to specifically rule on this point
because Banks' attorney wasn't paid the statutory amount but
a negotiated fee. So for "the statutory fees are part of
plaintiff's income" theory to work it would seem the judge
would have to order the amount of fees and that is what the
attorney would have to get.

The Supreme Court did note that this theory is probably moot
for most if not all such cases as they are covered by the
new tax law.

--
Drew Edmundson

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David Woods, EA, ChFC, CLU <dwoods[at]woods-financial.com> wrote:
- quote -

When? He certainly didn't owe any to the attorney before
the defendant paid, so assume the defendant paid the
attorney first.

Seth

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- quote -

Is it "unfettered control"? Suppose there were a prior
judgment against the plaintiff for $10 million; would that
creditor be able to seize the entire payment, or would the
plaintiff's attorney have higher priority on that particular
money? (Or would it be shared proportionally in
bankruptcy?)

Seth

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"Seth Breidbart" <sethb[at]panix.com> wrote:
- quote -

No. Even if this situation were applied as you suggest, the
plaintiff owed that money to the attorney and recognized
income when the defendant paid it on his behalf.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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The case now stands as precedent for all circuits for those
questions of law that were answered by the Court and which
answers were necessary to support the decision made (i.e.,
holding versus dicta). If there are issues that were not
covered, or the answer to which was not germane to the
Court's holding, then the case is not binding precedent, but
is likely to be very persuasive.

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- quote -


No. The plaintiff would then have $9M of gross income. I
can't reduce my employment income by telling my boss to send
checks to the utility companies and the landlord instead of
giving it all to me - same principle works here. If you
receive unfettered control over a sum of money, and that
money is compensatory, then it is income to you regardless
of how it gets parcelled out.

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Seth Breidbart wrote:
- quote -

I don't think gross or net is an issue in this situation.

- quote -

In some cases the law provides that defendant can be held
liable for attorneys fees in addition to a judgment for
damages. In a case like that, based on what I've seen, it
can be negotiated that a certain portion (or specific dollar
amount) of a settlement will be for attorneys fees. In that
case I believe that amount would be properly excludable from
the income of the plaintiff. Otherwise, it's all treated as
income to the plaintiff, with the payment to the attorney
being deductible or not depending on the circumstances.

Stu

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MTW wrote:

- quote -

Yup!

--

Alan
http://taxtopics.net

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MTW wrote:

- quote -

The Supreme Court makes rules for the entire country. They just
happened to take these two cases. But that does not imply that cases
from other circuits that are in conflict, are good authority.

Stu

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William Brenner <wjbjr[at]webtv.net> wrote:

- quote -

Is the gross/net monetary amount the controlling factor?
Should it be?

Given that many judgments are negotiated after-the-fact,
would it be permissible for the winner of a $10 million
judgment (50% attorney contingency) to say "Let's negotiate
it down to $9 million: you pay me $4 million, and my
attorney $5 million"? Would that lower his gross income to
$4 million, so he doesn't get screwed by AMT?

Seth

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Stuart Bronstein wrote:

- quote -

Does this recent decision now stand as precedent of ALL
circuits, even though it appeared that the ~high~ justices
declined to consider issues other than those covered by the
two cases in question (9th and 6th circuits, I believe)? As
I recall, there has been much activity on this issue (and
some novel theories) in the 5th Circuit. Are they now "out
of luck" as well?

MTW

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- quote -

Yes.

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Dick Adams wrote:
- quote -

"WHO" is Willie?

Are you speaking of William Rehnquist, Chief Justice? If
so, he's been ailing here of late and my sources tell me
he's seriously considering retirement.

ChEAr$,
Harlan Lunsford, EA n LA
Thu, 27 Jan 2005

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Dick Adams <rdadams[at]smart.net> wrote:
- quote -

Except they didn't really fix it. They only fixed it for
some people and left the others hanging out to dry. No fix
at all was provided if the attorney bills by the hour or in
some other way her fee isn't contingent.

Professor Maule has a great blog on this on 10-01-04 and on
1-24-05. His blog is available at:

http://mauledagain.blogspot.com/

I love this line:

"The fact that Congress chose to help only some taxpayers
and not all highlights the dangers of a Congress that
legislates by caving to lobbyists rather than acting with
wisdom and even-handed judgment."

- quote -

I believe he sat it out because of his illness.

--
Drew Edmundson, CPA (NC)

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D. Stussy wrote:

- quote -

That case specifically overruled a 9th Circuit case as well
as one other.

Stu

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Dick Adams wrote:

- quote -

I'd guess it was a combination of his health and his vote
not being necessary for the final outcome. In a case where
there'd be a 4-4 tie without him he's more likely to
participate.

Stu

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Without reading the opinion to determine the Honourable
Justices' reasoning, one could argue that, in principle, the
existence of a contingency fee is not really different in
terms of the gross monetary amount received by the plaintiff
than would be the case if the plaintiff received the entire
award and then paid a (non-contingency) attorney fee out of
pocket.

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Bill wrote:
- quote -

Expenses involved in the production of income -- the type
of income depends on the type of lawsuit.

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William Brenner wrote:

- quote -

Does that mean we're overturning certain lower court
decisions, like the 9th's for Oregon, and other similar
cases in other circuits?

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Bill wrote:
- quote -

They've always been deductible on the Schedule A as an
Itemized Misc. Deduction (not investment expense).
Unfortunately, this category of deductible expense does not
exist in the world of the AMT. That's why it is possible
for a litigant to wind up with "zip" even if they win a huge
award.

--
Alan
http://taxtopics.net

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