- 13 -
preparing for and conducting their negotiations with APV and its attorneys.
Petitioner’s complaint filed with DILHR, his civil complaint
with the District Court for the Western District of Wisconsin,
and the settlement agreement were signed by Michael R. Fox or
Mary E. Kennelly of Fox & Fox. Fox & Fox’s office is in Madison,
Wisconsin; Mr. Fox and Ms. Kennelly are admitted to practice law
in Wisconsin.
OPINION
Petitioners concede that the proceeds from the settlement
are includable in gross income except for the portion of the
settlement used to pay Fox & Fox under the contingent fee
agreement. Specifically, petitioners argue that they exercised
insufficient control over the settlement proceeds used to pay Fox
& Fox and should, therefore, not be taxed on amounts to which
they had no “legal” right and could not, and did not, receive.
Conversely, respondent argues that (1) the amount petitioners
paid or incurred as attorney’s fees must be included in
petitioners’ gross income and (2) the contingent fee is
deductible as a miscellaneous itemized deduction, subject to the
2-percent floor under section 67 and the overall limitation under
section 68 and also nondeductible in computing the alternative
minimum tax (AMT) under section 56.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011