Sigitas J. Banaitis - Page 16




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          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                   






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