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portion used to satisfy attorney’s fees and court costs and
related legal expenses.3
B. Earned Income Credit
In 1995, petitioner lived with Jeffery S. Roland (Mr.
Roland). Although petitioner and Mr. Roland were not married,
they lived together as common-law husband and wife. Mr. Roland’s
younger sister, Amanda Roland (Amanda), lived with petitioner and
Mr. Roland for a portion of the year. At the time, Amanda was 20
years old.
Petitioner filed a joint return for 1995 with Mr. Roland.
On that return, petitioner and Mr. Roland claimed both a
dependency exemption for, and an earned income credit with
respect to, Amanda, who was described as their foster child.
3 At trial, respondent conceded that the portion of the
$40,000 recovery that was used to pay attorney’s fees and court
costs and related legal expenses does not constitute gross
income. See Davis v. Commissioner, 210 F.3d 1346 (11th Cir.
2000), affg. per curiam T.C. Memo. 1998-248. In Davis, the Court
of Appeals for the Eleventh Circuit followed the Court of Appeals
for the Fifth Circuit and held that under Alabama law, amounts
paid to an attorney, subject to a contingency fee arrangement,
are excludable from gross income. See Cotnam v. Commissioner,
263 F.2d 119 (5th Cir. 1959), affg. in part and revg. in part 28
T.C. 947 (1957). Although we do not share this view, see Kenseth
v. Commissioner, 114 T.C. 399 (2000), under the so-called Golsen
rule we follow the law of the circuit to which a case is
appealable. See Golsen v. Commissioner, 54 T.C. 742 (1970),
affd. 445 F.2d 985 (10th Cir. 1971).
Consistent with respondent’s concession, petitioner is not
entitled to deduct the portion of the recovery that was used to
pay attorney’s fees and court costs and related legal expenses.
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