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retains its character as compensation ordinary income. The
service provider’s income does not take its character from the
property that belongs to the other party who made it available to
be worked on by the service provider.
Conclusion
The assignment of income cases decided by the Supreme Court
for the most part have arisen in intrafamily donative transfers.
Assignment of income cases arising in commercial contexts have
concerned attempts at income tax avoidance between related
parties. The touchstone of these cases has been the retained
control over the subject matter of the assignment by the
assignor.
The control retained by Mr. Kenseth in this case was much
less than the control retained by the assignor in any of the
cases in which the assignment of income doctrine has been
properly applied. Indeed, the control retained by Mr. Kenseth
was so much less as to make it unreasonable to charge him with
the full amount of his share of the total settlement, without
offset of the attorney’s fee apportioned against his share. From
the inception of the contingent fee agreement, a substantial
portion of any recovery that might be obtained was dedicated to
Fox & Fox, who through the mixture of their labor with the claims
of Mr. Kenseth and his colleagues, first, caused the claims to be
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