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In ADEA cases, it is established that only the prevailing
parties, not the parties' attorneys, have standing to seek
attorney's fees. Benitez v. Collazo-Collazo, 888 F.2d 930, 933
(1st Cir. 1989); Soliman v. Ebasco Servs., Inc., 822 F.2d 320,
323 (2d Cir. 1987); Brown v. General Motors Corp., 722 F.2d 1009,
1011 (2d Cir. 1983); Rainsbarger v. Columbia Glass & Window Co.,
600 F. Supp. 299, 301-302 (W.D. Mo. 1984).
We recognize that there is case law treating amounts
received in litigation to cover attorney's fees as not
constituting taxable income. In Cotnam v. Commissioner, 263 F.2d
119 (5th Cir. 1959), affg. in part and revg. in part 28 T.C. 947
(1957), the taxpayer entered into a contingency fee agreement
with her attorneys under which the taxpayer agreed to pay her
attorneys 40 percent of any funds recovered. In Cotnam, we held
that the contingency fee agreement did not transfer any interest
in the judgment to the attorneys, and we held that the attorney's
fees that were awarded were to be included in the taxpayer's
income. Cotnam v. Commissioner, 28 T.C. at 954.
The Court of Appeals for the Fifth Circuit reversed and held
that under Alabama law the effect of the contingency fee
agreement was to establish in favor of the attorneys an equitable
lien on 40 percent of the funds recovered, and the Court of
Appeals concluded that the portion of the funds allocated to
attorney's fees was to be treated as owned by the attorneys, not
by the taxpayer, and therefore that the funds allocated to
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