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services of counsel when it was assigned. In that respect, the
court held that the assignment was no different from a joint
venture between the taxpayer and the attorney. The court
explained that this case was distinguishable from other
assignment of income cases in that there was “no vested interest,
only a hope to receive money from the lawyer’s efforts and the
client’s right, a right yet to be determined by judge and jury.”
Id. at 857. The court stated:
Here the client as assignor has transferred some of the
trees in his orchard, not merely the fruit from the
trees. The lawyer has become a tenant in common of the
orchard owner and must cultivate and care for and
harvest the fruit of the entire tract. Here the
lawyer’s income is the result of his own personal skill
and judgment, not the skill or largess of a family
member who wants to split his income to avoid taxation.
The income should be charged to the one who earned it
and received it, not as under the government’s theory
of the case, to one who neither received it nor earned
it. The situation is no different from the transfer of
a one-third interest in real estate that is thereafter
leased to a tenant. [Id. at 858.4]
This Court has, for an extended period of time, held the
view that taxable recoveries in lawsuits are gross income in
their entirety to the party-client and that associated legal
fees--contingent or otherwise--are to be treated as deductions.5
4 The Court of Appeals’ analogy is, to some extent,
inapposite because the transfer of trees in and of itself could
be consideration in kind and result in gains to the taxpayer.
More significantly, if the trees are analogous to the taxpayer’s
chose in action or compensatory rights, then the transfer
represents a classic anticipatory assignment of income.
5 This view is based on the well-established assignment of
(continued...)
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