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Cotnam with respect to the analysis in the opinion of Judges
Rives and Brown that the attorney’s fee came within an exception
to the assignment of income doctrine. See, e.g., Estate of
Gadlow v. Commissioner, 50 T.C. 975, 979-980 (1968) (Pennsylvania
law); O’Brien v. Commissioner, 38 T.C. 707, 712 (1962), affd. per
curiam 319 F.2d 532 (3d Cir. 1963); Petersen v. Commissioner, 38
T.C. 137, 151-152 (1962) (Nebraska law and South Dakota law);
Srivastava v. Commissioner, T.C. Memo. 1998-362, on appeal (5th
Cir., June 14, 1998) (Texas law); Coady v. Commissioner, T.C.
Memo. 1998-291, on appeal (9th Cir., Nov. 3, 1998) (Alaska law).
Addressing the assignment of income question in similar
circumstances, the U.S. Court of Appeals for the Federal Circuit
reached a result opposite from that reached in Cotnam. See
Baylin v. United States, 43 F.3d 1451, 1454-1455 (Fed. Cir.
1995). In Baylin, a tax matters partner entered into a
contingent fee agreement with the partnership’s attorney in a
condemnation proceeding. When the litigants entered into a
settlement, the attorney received his one-third contingency fee
directly from the court in accordance with the fee agreement. On
its tax return, the partnership reduced the amount realized from
the condemnation by the amount of attorney’s fees attributable to
recovery of principal and deducted from ordinary income the
attorney’s fees attributed to the interest income portion of the
settlement. The Government challenged this classification of the
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