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taxpayer to exclude from gross income the portion of his or her
recovery attributable to contingent attorney’s fees. See
Srivastava v. Commissioner, 220 F.3d 353, 355 (5th Cir. 2000),
revg. and remanding in part and affg. on another issue T.C. Memo.
1998-362. On January 24, 2005, the Supreme Court resolved a
split in the circuits over the contingent fee issue, holding
that, as a general rule, when a taxpayer’s litigation recovery
constitutes income, the taxpayer is taxable on the contingent fee
portion of the litigation recovery. Commissioner v. Banks, 543
U.S. ___, 125 S. Ct. 826, 829 (2005).
Petitioner contends that the amendment would be prejudicial
to him. Citing Estate of Horvath v. Commissioner, 59 T.C. 551,
555-556 (1973), petitioner argues that the attorney’s fees issue
“necessarily will require dramatically different evidence,
analysis, and case development from the issues previously pled.”
Although petitioner has not identified how the evidence or
analysis would be “dramatically different”, we agree that the
applicability of the Supreme Court’s Banks opinion is not
clearcut or absolute. Certain arguments of the parties in Banks
were not addressed because they were not made in the lower
courts. Commissioner v. Banks, 125 S. Ct. at 833. We would have
to reopen the record so that these arguments could be properly
addressed in these cases. We are not persuaded that justice
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