- 16 -
owed $3,864,012 from petitioner for services rendered. The
payment structure is immaterial.
Petitioner has set forth an alternative argument. He argues
that, in spite of Sinyard v. Commissioner, supra, the Court of
Appeals for the Ninth Circuit would not apply Federal tax law in
this case. Instead, petitioner contends that Oregon law would
apply to determine whether a property right in the settlement
proceeds had been created in the attorney under the contingent
fee agreement. Petitioner contends that as Oregon law gives the
attorney such a right, the Court of Appeals would disregard
Kenseth and Sinyard.
In spite of petitioner’s argument, we find nothing in Oregon
law which provides an attorney hired under a contingent fee
agreement with anything more than a right to compensation for
services rendered. When BCal directly paid petitioner’s
attorneys, it merely paid the fees petitioner already owed to
petitioner’s attorney. Indeed, the settlement agreement
explicitly stated that BCal would pay “defendant’s attorney,
Charles Merten”.
In addition, the Court of Appeals for the Ninth Circuit
explicitly rejected the reasoning in Cotnam v. Commissioner,
supra. The court stated: “We do not see how the existence of a
lien in favor of the taxpayer’s creditor [taxpayer’s attorney]
makes the satisfaction of the debt any less income to the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011