- 51 -
respectively attributable.” There is no provision
whatever for spreading back any related expenses as was
done in petitioner’s returns.
Judge Raum saw the situation as identical with that in Smith
v. Commissioner, 17 T.C. at 144, quoting what the Court said in
that case in upholding the taxpayer’s claim of entitlement to the
deduction in the year of receipt, notwithstanding that the
Commissioner had computed his tax liability by spreading the back
pay award over the years of service:
Without this section, the entire $212,000 would be
income in 1945. Section 107 is silent as to expenses
incurred in connection with any collection of back pay,
and there are no regulations or decisions which we have
been able to find on the question. To limit
application of section 107 to amounts received less
expenses connected with collection is not a function
for the Court, but rather is a task for Congress if
that is the result which they wish. We therefore hold
that petitioner is entitled to deduct the $25,000 legal
expense in 1945.
Judge Raum then discussed the opinions of the Tax Court and
the Court of Appeals for the Fifth Circuit in Cotnam v.
Commissioner, supra, concluding: “In reaching that conclusion
the majority [in the Fifth Circuit] placed considerable stress
upon certain provisions of an Alabama statute relating to
attorney’s liens.”24 O’Brien v. Commissioner, supra at 712.
24 It’s also noteworthy that the final paragraph of Judge
Wisdom’s dissent in Cotnam v. Commissioner, 263 F.2d 119, 127
(5th Cir. 1959), revg. 28 T.C. 947 (1957), like the opinion of
Judge Turner in the Tax Court, and the Tax Court’s prior opinion
in Smith v. Commissioner, 17 T.C. 135 (1951), revd. on another
issue 203 F.2d 310 (2d Cir. 1953), relied upon the lack in sec.
(continued...)
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