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113 T.C. 152 (1994); Coady v. Commissioner, 213 F.3d 1187 (9th
Cir. 2000), affg. T.C. Memo. 1998-291; O’Brien v. Commissioner,
319 F.2d 532 (3d Cir. 1963).
In a recent case, the Court of Appeals for the Ninth
Circuit3 held that a defendant’s payment of a plaintiff’s
attorney’s fees under a fee shifting statute results in income to
the plaintiff. Sinyard v. Commissioner, 268 F.3d 756 (9th Cir.
2001), affg. T.C. Memo. 1998-364. That same result pertains even
though the attorney was hired under a contingent fee agreement.
Id. In Sinyard, the court applied the discharge of indebtedness
and constructive receipt doctrines as the rationale for its
holding.
We find nothing in the case at bar to cause us to differ
from our previous analyses in this regard. The fact that the
attorney’s fees were paid directly from petitioner’s settlement
proceeds does not alter the amount of petitioner’s total
settlement recovery. Petitioner settled the case for $8,728,559.
The defendants wrote one check to petitioner for $4,864,547 and
one check to petitioner’s attorney, Charles J. Merten, for
$3,864,012. The fact that two checks were written does not
change the facts that (1) petitioner was owed $8,728,559 from the
defendants for the settlement amount and (2) Merten was
3 Petitioner’s case would be appealable to the Court of
Appeals for the Ninth Circuit.
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