- 18 -
The Attorney’s Fees
Petitioner contends that the $2,519,000 that was paid to his
attorneys should not be includable in gross income under the line
of cases beginning with Cotnam v. Commissioner, 263 F.2d 119 (5th
Cir. 1959), revg. in part and affg. in part 28 T.C. 947 (1957).
Respondent contends that Cotnam was “wrongly decided”.
Respondent also contends that if the Cotnam holding is accepted
as correct, then petitioner’s execution of the contingent fee
agreement resulted in an assignment of a portion of petitioner’s
claim to his attorneys--a taxable disposition of property.
Since the trial and briefing in this case, several courts
have had the opportunity to consider the Cotnam holding. This
Court reconsidered its view of the Cotnam holding following
several opinions on the subject by Courts of Appeals, including
the more recent Estate of Clarks v. United States, 202 F.3d 854
(6th Cir. 2000). After full reconsideration, this Court has
concluded that it will “continue to adhere to our holding * * *
that contingent fee agreements * * * come within the ambit of the
assignment of income doctrine and do not serve * * * to exclude
the fee from the assignor’s gross income.” Kenseth v.
Commissioner, 114 T.C. 399, 412 (2000). Since our Kenseth
holding, the Courts of Appeals for the Fifth and Eleventh
Circuits have followed the Court of Appeals for the Fifth
Circuit’s holding in Cotnam. See Srivastava v. Commissioner, 220
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011