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contingent fee agreement. For all these reasons, the broader
ground of the decisions of the Courts of Appeals in Cotnam v.
Commissioner, 263 F.2d 119 (5th Cir. 1959), and Estate of Clarks
v. United States, 202 F.3d 854 (6th Cir. 2000), applies to the
case at hand. The contingent fee agreement did not effect an
assignment of income that must be disregarded for income tax
purposes under Helvering v. Eubank, 311 U.S. 122 (1940),
Helvering v. Horst, 311 U.S. 112 (1940), and Lucas v. Earl, 281
U.S. 111 (1930).
This conclusion provides an independent and sufficient
ground for the holding, decoupled from the narrow ground of
Cotnam and Estate of Clarks regarding attorneys’ ownership
interests in lawsuits under State law, that Mr. Kenseth’s gross
income in the case at hand does not include any part of the
settlement proceeds paid to the Fox & Fox trust account and
retained by Fox & Fox as its contingent fee.
The application of the decisions of the Courts of Appeals in
Cotnam and Estate of Clarks is not limited to situations in which
local law allows a transfer of a “proprietary” interest in the
claim to the attorney. These holdings apply to situations in
which the attorney obtains only the usual security interest in
the claim and its proceeds that is provided in most States.
It is noteworthy that neither the additional statement of
the Cotnam majority nor the dissent of Judge Wisdom referred to
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