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Petitioner’s contingent fee agreement with her attorney
stated that the attorney would be entitled to a defined
percentage of any recovery, unless, as occurred, the attorney
received his fees and costs pursuant to a fee shifting statute.
We are thus presented with the issue which the Court in Banks did
not reach.10
We are not without guidance, however. The Court of Appeals
for the Ninth Circuit, the court to which an appeal of this
matter most likely lies, has held that a defendant’s payment of a
plaintiff/taxpayer’s attorney’s fees and costs pursuant to a fee
shifting statute constitutes income to the taxpayer. Sinyard v.
Commissioner, 268 F.3d 756 (9th Cir. 2001), affg. T.C. Memo.
1998-364. In Sinyard, the taxpayers signed with their attorney a
contingent fee agreement similar to the one here. The settlement
agreement apportioned some of the settlement so as to pay in full
the attorney’s fees and costs pursuant to the fee shifting
provisions of 29 U.S.C. secs. 216(b) and 626(b). The court held
that the apportioned funds were attributable to the taxpayers,
who, in the court’s words, “bound themselves to pay * * * [their
attorneys] one-third of what they received. When * * * [the
defendant] satisfied this obligation, the Sinyards were so much
10 If the attorney’s fees were received under the contingent
fee agreement as opposed to the statute, Commissioner v. Banks,
543 U.S. ___, 125 S. Ct. 826 (2005), would control and the result
would be the same.
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