- 17 -
the richer. That they never laid hands on the money paid to the
lawyers does not obliterate their constructive receipt.” Id. at
759. We agree and hold likewise.11
We therefore sustain respondent’s determination that the
$198,000 paid to petitioner’s attorney in 1998 should have been
reported by her as income in 1998.12
______________________________________
We have considered all of the parties’ arguments and
rejected those not discussed herein as meritless. Accordingly,
Decision will be entered
under Rule 155.
11 Petitioner’s reliance on Flannery v. Prentice, 26 Cal.
4th 572 (2001), is misplaced. We are not bound by State law
classifications as to the ownership of income. Burnet v. Harmel,
287 U.S. 103 (1932). Any contingent attorney’s fees paid by
petitioner on account of her (taxable) civil settlement would
properly be income under Commissioner v. Banks, supra, and she
may not escape this outcome by arguing that, because her
attorney’s fees and costs were awarded by a civil court pursuant
to a statutory fee shifting provision, the income is properly
attributable to her attorney. See Sinyard v. Commissioner, 268
F.3d 756, 760 (9th Cir. 2001), affg. T.C. Memo. 1998-364. We are
not presented with, and do not decide, whether petitioner would
have been taxed on the attorney’s fees paid to her attorney, had
she been represented by a nonprofit legal foundation.
12 We note with approval respondent’s concession that any
sums payable to petitioner’s attorney in 1998 are deductible by
her in that year as a miscellaneous itemized deduction, subject
to any applicable limitations.
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