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attorney's fees did not constitute income to the taxpayer.
Cotnam v. Commissioner, 263 F.2d at 125, citing 46 Ala. Code sec.
64 (1940).
In Davis v. Commissioner, T.C. Memo. 1998-248, we followed
the Court of Appeals opinion in Cotnam but only because the same
Alabama law and the same appellate venue were involved as in
Cotnam. See Golsen v. Commissioner, 54 T.C. 742 (1970), affd.
445 F.2d 985 (10th Cir. 1971); see also In re Hamilton, 212
Bankr. 384 (Bankr. M.D. Ala. 1997), applying Alabama law and
following Cotnam.
Respondent disagrees with the Court of Appeals for the Fifth
Circuit, and respondent continues to assert that, as we held in
Cotnam, notwithstanding the peculiarities of State law, under
contingency fee agreements attorneys do not acquire ownership of
those portions of funds recovered in lawsuits allocable to
attorney's fees, and the attorneys’ clients are taxable on the
full amount of the funds recovered in spite of any lien the
attorneys may have thereon.
In this case, petitioner resided in Arizona when he filed
his petition herein. The parties, however, have not cited any
provision of Arizona statutory law, and we have found none, that
pertains to the legal rights of Arizona attorneys in monetary
awards recovered on behalf of their clients.
Decisions by Arizona courts have addressed this issue only
to a limited extent. In Skarecky & Horenstein, P.A. v. 3605 N.
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