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Woodward v. Commissioner, 219 F.3d 941 (9th Cir. 2000),
affg. T.C. Memo. 1998-395. In that case, the court held
that an award of punitive damages was fully includable in
the taxpayers' gross income, notwithstanding the fact that
a portion of the award was retained by the taxpayers'
attorney, pursuant to a contingent fee agreement. Id.
The Court of Appeals noted that under California law, the
law applicable in that case and in the instant case, "an
attorney lien does not confer any ownership interest upon
attorneys or grant attorneys any right and power over the
suits, judgments, or decrees of their clients." Id. at
943; see also Brewer v. Commissioner, T.C. Memo. 1997-542
(attorney's fees paid with respect to action for statewide
discrimination in California), affd. without published
opinion 172 F.3d 875 (9th Cir. 1999). Accordingly, the
Court of Appeals found no reason to distinguish the payment
to the taxpayers' attorney under the contingent fee
agreement in that case from the attorneys' fees at issue in
Coady v. Commissioner, 213 F.3d 1187 (9th Cir. 2000), affg.
T.C. Memo. 1998-291.
In Coady v. Commissioner, supra, the Court of Appeals
for the Ninth Circuit rejected a taxpayer's argument that a
judgment for lost wages and benefits arising out of her
wrongful termination should be reduced by contingent legal
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