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8. Majority Opinion’s Handling of Authorities
The majority misstate the Alexander, Baylin, Brewer, and
O’Brien cases (majority op. pp. 14, 17-18, and 21, respectively)
and what they stand for.
The majority opinion at page 14 creates a misleading
impression about the significance of Alexander v. IRS, 72 F.3d
938, 948 (1st Cir. 1995), affg. T.C. Memo. 1995-51. The Court of
Appeals for the First Circuit did affirm the Tax Court, and the
Court of Appeals did say that applying the AMT to the itemized
deductions “smacks of injustice”, as indeed it did--the sum of
the legal fees and the additional tax liability exceeded the
taxpayers’ net taxable recovery. What the majority opinion omits
is that the taxpayer in Alexander did not argue, as petitioners
argue in the case at hand, that the legal fee should be excluded
from petitioner’s gross income because the assignment of income
rules don’t properly apply.57 There was both a taxable recovery–-
$250,000–-and a concededly non-taxable recovery–-$100,000–-and
the taxpayer deducted an allocable part of his legal fees
(computed on a disproportionate time basis, which the
Commissioner did not dispute) from the taxable recovery. The Tax
Court and the Court of Appeals for the First Circuit held,
57 Alexander v. IRS, 72 F.3d 938, 948 (1st Cir. 1995), affg.
T.C. Memo. 1995-51, lacked any findings as to whether the legal
fee in question was a contingent fee or a fee based on hourly
rates for which the taxpayer was personally liable.
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