- 24 -
U.S. 213, 219 (1961). We can identify no specific exclusion from
gross income for the payment made to Fox & Fox. While it is true
that petitioner did not physically receive the portion of the
settlement proceeds used to pay the attorney’s fees, he did
receive the full benefit of those funds in the form of payment
for the services required to obtain the settlement. At the time
that petitioner entered into the contingent fee agreement, he had
already been discriminated against in the form of his wrongful
termination from employment. In other words, petitioner was owed
damages, and the attorney was willing to enter into a contingent
fee agreement to recover the damages owed to petitioner.
Therefore, petitioner must recognize as income the amount of the
judgment.
In coming to this conclusion, we reject the significance
placed by the U.S. Court of Appeals for the Sixth Circuit on the
speculative nature of the claim and/or that the claim was
dependent upon the assistance of counsel. Despite characterizing
petitioner’s right to recovery as speculative, his cause of
action had value in the very beginning; otherwise, it is unlikely
that Fox & Fox would have agreed to represent petitioner on a
contingent basis. We find no meaningful distinction in the fact
that the assistance of counsel was necessary to pursue the claim.
Attorney’s fees, contingent or otherwise, are merely a cost of
litigation in pursuing a client’s personal rights. Attorneys
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011