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the attorney receives nothing. I agree with this additional
point of the Court of Appeals majority in Cotnam.41
The points made by the Courts of Appeals in Cotnam and
Estate of Clarks v. Commissioner, supra, are not in complete
agreement, but their differences don’t invalidate the essential
on which they do agree. The Courts of Appeals in Cotnam and
Clarks agree that the value of the claim was speculative and
dependent on the services of counsel who was willing to take it
on a contingent fee basis to try to bring it to fruition. They
also agree that the only benefit the taxpayer could obtain from
his or her claim was to assign the right to receive a portion of
it (the contingent fee percentage) to an attorney in an effort to
collect the remainder and that such benefit does not amount to
full enjoyment that justifies including the fee portion in the
assignor’s gross income. The Courts of Appeals in Cotnam and
Clarks also agree that the proper treatment is to divide the
gross income between the client and the attorney, rather than to
41 Regarding the reliance of the Commissioner and Judge
Wisdom on Old Colony Trust Co. v. Commissioner, 279 U.S. 716
(1929), I observe, as did Judges Rives and Brown, that the
contingent fee was not one that the claimant (Mr. Kenseth) was
ever personally obligated to pay, even if there should be a
recovery. Under Sections IV and VIII of the contingent fee
agreement (unlike Section II, which personally obligated the
client to pay litigation expenses, as defined), the attorneys’
right to receive the fee was secured solely by the lien that
would attach to any recovery, which was the sole contemplated and
actual source of payment of the fee.
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