Eldon R. Kenseth and Susan M. Kenseth - Page 1

                                    114 T.C. No. 26                                     

                                UNITED STATES TAX COURT                                 

                ELDON R. KENSETH AND SUSAN M. KENSETH, Petitioners v.                   
                     COMMISSIONER OF INTERNAL REVENUE, Respondent                       

               Docket No. 2385-98.                 Filed May 24, 2000.                  

                    In 1993, P recovered a $229,501 settlement under                    
               the Federal Age Discrimination in Employment Act of                      
               1967, Pub. L. 90-202, sec. 2, 81 Stat. 602, current                      
               version at 29 U.S.C. secs. 621-633a (1994).  A portion                   
               of the settlement proceeds was deposited in the trust                    
               account of P’s attorney, X.  In distributing the                         
               settlement proceeds, X retained $91,800 in attorney’s                    
               fees pursuant to a contingent fee agreement.  The                        
               remaining amount was paid to P.  P excluded the                          
               settlement proceeds designated as personal injury                        
               damages under the settlement agreement.  R determined                    
               that the entire $229,501 recovered was includable in                     
               gross income but allowed the attorney’s fees paid as a                   
               miscellaneous itemized deduction.  P concedes that the                   
               settlement proceeds are not excludable in their                          
               entirety but contends that the amount allocable to                       
               attorney’s fees should be excluded from gross income.                    
                    Held, the amount retained by X for attorney’s fees                  
               is includable in P’s gross income for 1993 under the                     
               assignment of income doctrine.  This Court respectfully                  

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