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paid to his attorney under the contingent fee agreement. Id. at
___, ___, ___, 125 S. Ct. at 828-829, 832, 834.
In arriving at its decision, the Supreme Court rejected the
taxpayers’ argument that a contingent fee agreement establishes,
for tax purposes, a joint venture or partnership “in which the
client and attorney combine their respective assets--the client’s
claim and the attorney’s skill--and apportion any resulting
profits.” Id. at ___, 125 S. Ct. at 832-833. In rejecting this
argument, the Supreme Court reasoned that “regardless of the
variations in particular compensation agreements or the amount of
skill and effort the attorney contributes,” the relationship
between a client and his attorney is a “quintessential principal-
agent relationship” because the client retains ultimate dominion
and control over the underlying claim, and the attorney is
dutybound to act only in the interests of the client. Id. at
___, ___, 125 S. Ct. at 832, 833. The Supreme Court further held
that the client may not exclude litigation proceeds used to pay
attorney’s fees from his gross income, even when the attorney-
client contract or State law confers special rights or
protections on the attorney, including providing the attorney
with an “ownership interest” in his fees, so long as these
protections do not alter the fundamental principal-agent
character of the relationship. Id. at ___, 125 S. Ct. at 833.
The Supreme Court declined to address whether a contingent fee
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