- 52 -
Turning back to the case before him, Judge Raum found that there
were no such provisions in Pennsylvania law. Judge Raum then
questioned whether State law had any bearing on the matter,
inasmuch as the underlying claim had been prosecuted in the
United States Court of Claims under Federal law. What followed,
Judge Raum’s ipse dixit on assignment of income, is dictum. Id.:
However, we think it doubtful that the Internal Revenue
Code was intended to turn upon such refinements. For,
even if the taxpayer had made an irrevocable assignment
of a portion of his future recovery to his attorney to
such an extent that he never thereafter became entitled
thereto even for a split second, it would still be
gross income to him under the familiar principles of
Lucas v. Earl * * *, Helvering v. Horst * * *, and
Helvering v. Eubank * * *. The fee, of course, would
be deductible, just as it was held to be in Weldon D.
Smith. Cf. Walter Petersen * * *. We reach the same
result here. Petitioner is entitled to the benefit of
section 1303 with respect to his $16,173.05 recovery in
1957 and may deduct the $8,243.10 legal expenses in
that year; such legal expenses may not be spread back
over earlier years, nor may the same result be achieved
indirectly by subtracting the expenses from the
recovery and then applying section 1303 to the reduced
amount.
Estate of Gadlow v. Commissioner, supra, is the last regular
Tax Court opinion in this series. Estate of Gadlow is similarly
distinguishable from the case at hand. Like the earlier cases,
Estate of Gadlow concerned the application of a provision for
computing income tax liability upon the receipt of damages for
breach of contract by prorating the recovery over the earlier
24(...continued)
107 of any express provision for allocating expenses against the
prorated compensation.
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