Brian David Nelson and Shauna Lee Nelson - Page 12




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         Although petitioner did not physically receive the portion of the            
         settlement proceeds used to pay attorney’s fees, he did receive              
         the benefit of those funds in the form of payment for the                    
         services required to obtain the settlement.                                  
              In Kenseth v. Commissioner, 114 T.C. 399 (2000), we                     
         reconsidered the view of the U.S. Court of Appeals for the Fifth             
         Circuit regarding contingent fee agreements as expressed in                  
         Cotnam v. Commissioner, 263 F.2d 119 (5th Cir. 1959), affg. in               
         part and revg. in part 28 T.C. 947 (1957), in light of Estate of             
         Clarks v. United States, 202 F.3d 854 (6th Cir. 2000), and the               
         views of other Courts of Appeals.  We concluded that we would                
         continue to adhere to our holding in O’Brien v. Commissioner, 38             
         T.C. 707 (1962), affd. per curiam 319 F.2d 532 (3d Cir. 1963),               
         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, supra at 412.  We also declined to examine the                 
         effect of States’ attorney’s lien statutes to decide the case.               
         See id.                                                                      
              Thus, petitioners cannot avoid income tax by an anticipatory            
         assignment of a portion of petitioner’s settlement proceeds to               
         his attorneys.  See Coady v. Commissioner, 213 F.3d 1187, 1190               
         (9th Cir. 2000), affg. T.C. Memo. 1998-291; Kenseth v.                       
         Commissioner, supra.  Furthermore,  petitioners have presented no            






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