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issues in the IBP litigation, which we have held to be for punitive damages,
is not excludable from his income under section 104(a)(2).
Petitioner contends that the contingent legal fees paid to his attorney
in connection with his litigation with IBP should be a reduction of the amount
he received pursuant to judgment or in settlement of the IBP litigation.
Respondent contends that these fees, to the extent deductible, should be
considered miscellaneous itemized deductions subject to reduction by 2 percent
of petitioner's adjusted gross income under section 67(a). The basis of
petitioner's contention is that the contingent fee arrangement created a joint
venture or partnership between him and the law firm. Petitioner argues that
the portions of the judgment and settlement paid over to the law firm pursuant
to that contingency fee were not income to petitioner.
Section 7701(a)(2) defines a partnership as "a syndicate, group, pool,
joint venture, or other unincorporated organization, through or by means of
which any business, financial operation, or venture is carried on". Whether a
partnership exists is a question of fact. To be a partnership, the parties,
in good faith and acting with a business purpose, must intend to join together
in the present conduct of an enterprise. Commissioner v. Culbertson, 337 U.S.
733, 742 (1949); see Estate of Smith v. Commissioner, 313 F.2d 724, 732-733
(8th Cir. 1963), affg. in part, revg. in part and remanding 33 T.C. 465
(1959).
In determining whether a partnership exists for purposes of Federal tax,
we have looked at such factors as the agreement of the parties and their
conduct in executing its terms; the contributions which each party has made to
the venture; each party's control over income and capital, and the right of
each to make withdrawals; and, most relevant to the issue here before us,
whether each party was a principal and coproprietor, sharing a mutual
proprietary interest in the net profits and having an obligation to share the
net losses. This is distinguished from a relationship where one party
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