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amount of $900,000, the taxpayer receiving a net of $525,000
after attorney's fees and costs. On remand, the Court of Appeals
provided the Tax Court with instructions on possible methods of
valuing the punitive damage portion of the settlement, stating
that "It is appropriate for the case to be remanded to the Tax
Court to permit a determination as to what portion of the
$900,000 gross amount in settlement (reduced to $525,000 net) was
attributable to punitive damages." Id. at 592. (Emphasis
added). The Court of Appeals does not explain its reason for
reducing the $900,000 gross amount to the $525,000 net amount,
before the directed allocation between punitive and compensatory
damages.
With the exception of Cotnam v. Commissioner, supra, and
Davis v. Commissioner, supra (which, as noted, followed Cotnam
under the Golsen rule), courts, when directly confronted with the
question, have uniformly rejected the contention that taxpayers
may exclude the amount of their legal fees and costs from gross
income in cases such as the one before us. Since the courts in
the 3 cases cited by petitioners were not so confronted, and
therefore did not have the occasion to focus directly on the
issue, we decline to accept those cases as precedent for the
proposition that petitioners' gross income is to be determined
net of their attorney's fees (and costs). For examples of recent
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