- 6 - receipt to the sum of the increases in gross income for the years to which the lump-sum payment is attributable. In the present case, the parties agree that an election under section 86(e)(1) would not serve to reduce the amount of the lump-sum payment that is includable in petitioners’ gross income in 2001. That being the case, it is apparent that 85 percent of the lump-sum payment is includable in petitioners’ gross income for 2001 pursuant to the formula of section 86(a). Petitioners further contend that the portion of the lump-sum payment of Social Security benefits that was paid to Mrs. Davis’s attorney for legal fees (i.e., $4,000) should be disregarded for purposes of section 86(a). We disagree. Under the so-called anticipatory assignment of income doctrine, “A taxpayer cannot exclude an economic gain from gross income by assigning the gain in advance to another party.” Commissioner v. Banks, 543 U.S. , 125 S. Ct. 826, 831 (2005), see Lucas v. Earl, 281 U.S. 111 (1930); S. Rept. 98-23, 26 (1983), 1983-2 C.B. 326, 328 (stating that for tax purposes, the total amount of Social Security benefits received by a taxpayer is not reduced by attorney’s fees). Therefore, the portion of the lump-sum payment of Social Security benefits thatPage: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011