-2-
received may be excluded from his gross income under section
104(a)(2);2 and (2) if the total settlement proceeds are not
excluded under section 104(a)(2), whether a portion of the
settlement proceeds that petitioner paid to his attorney as a
contingent fee3 may be excluded from petitioner’s gross income.4
1(...continued)
violates Amends. V, VI, and VII of the U.S. Constitution.
Petitioner’s arguments are specious and frivolous, resembling in
tone the type of tax-protester arguments with which we are
sometimes presented. We shall not address petitioner’s
“constitutional” arguments “with somber reasoning and copious
citation of precedent; to do so might suggest these arguments
have some colorable merit.” Crain v. Commissioner, 737 F.2d
1417, 1417 (5th Cir. 1984). We simply point out that this Court
is a court of law, Freytag v. Commissioner, 501 U.S. 868, 890-891
(1991), with jurisdiction to decide income tax issues of the type
raised in this case, secs. 6211-6214, I.R.C. 1986.
2Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
3In this case, the attorney’s fee was a fixed fee that was
contingent upon the successful settlement of petitioner’s claims.
Although the amount of the fee was not dependent on the amount of
the settlement, the fee nevertheless was a contingent fee in that
it was payable only if a settlement was successfully negotiated
and consummated. See Black’s Law Dictionary 338 (8th ed. 2004)
(a contingent fee is “A fee charged for a lawyer’s services only
if the lawsuit is successful or is favorably settled out of
court”).
4Respondent concedes that the $75,000 fee paid to
petitioner’s attorney is deductible, but only “as a miscellaneous
itemized deduction, subject to the restrictions of sections 67
and 68 and, if appropriate, the application of the Alternative
Minimum Tax provisions, sections 55 and 56.” In his reply brief,
petitioner argues for the first time that the attorney’s fee is
deductible or excludable as a Schedule C, Profit or Loss From
Business, expense but did not offer any evidence at trial that
(continued...)
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