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cause of action. In an en banc opinion, Isrin v. Superior Court
of Los Angeles County, 403 P.2d 728, 732 (Cal. 1965), the Supreme
Court of California concluded that contingent fee agreements "do
not operate to transfer a part of the cause of action to the
attorney but only give him a lien upon his client's recovery."
Petitioners also argue that cases which have addressed the
taxability of punitive damages have consistently analyzed those
damages net of attorney's fees and costs. Petitioners cite
Hawkins v. United States, 30 F.3d 1077 (9th Cir. 1994); O'Gilvie
v. United States, 66 F.3d 1550 (10th Cir. 1995), affd. in part,
revd. on the issue of taxability of punitive damages 519 U.S. 79
(1996); and Commissioner v. Miller, 914 F.2d 586 (4th Cir. 1990),
revg. and remanding 93 T.C. 330 (1989), supplemented by T.C.
Memo. 1993-49.
In both Hawkins v. United States, supra, and O'Gilvie v.
United States, supra, the respective Courts appear to have
accepted, without further consideration or discussion, the
premise that the question to be resolved was the taxability of
punitive damages, net of attorney's fees and costs. In
Commissioner v. Miller, supra, the Court of Appeals for the
Fourth Circuit reversed a prior Tax Court decision holding that
punitive damages are exempt from tax. The taxpayer had obtained
a jury verdict awarding $500,000 in compensatory damages and
$450,000 in punitive damages, which was settled for an overall
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