- 90 -
conclusion would open the door to tax avoidance. My response to
such concerns is that the contingent fee agreement is a peculiar
situation, far removed from the intrafamily and other related
party transfers, including commercial assignments within economic
units, that generated and continue to sustain the assignment of
income doctrine. The result I espouse can be confined to the
contingent fee situation; the tools of legal reasoning remain
alive and well to enable the Commissioner and the courts to
defend the fisc against transferors who in other contexts might
seize upon my proposed result in this case to try to extend it
beyond its proper limits.
10. Cropsharing as Alternative to Joint
Venture/Partnership Analogy
The suggestion of the Court of Appeals in Estate of Clarks
v. United States, supra, that the contingent fee arrangement is
like a partnership or joint venture has intuitive appeal.
Posner, Economic Analysis of Law 624-626 (5th ed. 1998),
describes the contingent fee agreement not only as a high
interest rate loan that compensates the lawyer for the risk he
assumes of not being paid at all if the claim is unsuccessful and
for the postponement in payment,59 but also as a kind of joint
59 See also Garlock, Federal Income Taxation of Debt
Instruments 6-10 (1998 Supp.): “Thus, rights to wholly
contingent payments would be treated in accordance with their
economic substance”. Garlock also comments p. 6-33:
(continued...)
Page: Previous 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 NextLast modified: May 25, 2011