Eldon R. Kenseth and Susan M. Kenseth - Page 20

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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               

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