- 56 -
Contrarywise, the purpose of the AMT is to prevent
individuals with substantial economic income from avoiding
significant tax liability.31 Although we have held that the
itemized deduction limitations and the AMT can apply to low and
middle-income taxpayers,32 that doesn’t mean that Congress
expected or intended that these provisions could result in
effective tax rates exceeding 50 percent. Where their interplay
with contingent fees has that potential, courts are entitled to
ask whether the plaintiff-claimant’s retained control--vis-a-vis
the control acquired and exercised by the attorney--is sufficient
to justify including in the claimant’s gross income the
contingent fee the attorney pays himself out of the recovery
proceeds.
4. Cotnam and Estate of Clarks
The inquiry continues with a review of the opinions of the
Court of Appeals for the Fifth Circuit in Cotnam v. Commissioner,
263 F.2d 119 (5th Cir. 1959), affg. in part and revg. in part 28
T.C. 947 (1957). The handling of the matter by the Court of
Appeals discloses both a narrow ground and a broader ground for
its decision. The numerous occasions we have distinguished
Cotnam on the narrow ground have obscured the broader ground and
31 See S. Rept. 99-313, at 518, 1986-3 C.B. (Vol. 3) 1, 518.
32 See, e.g., Huntsberry v. Commissioner, 83 T.C. 742
(1984); Lickiss v. Commissioner, T.C. Memo. 1994-103.
Page: Previous 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 NextLast modified: May 25, 2011