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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