Jottings By An Employer's Lawyer

Sunday, April 04, 2004

Making the Taxman Less A Part of Settlements - Maybe

In many discrimination cases, the plaintiff gives a contingency fee (usually 33% to 40%) to his or her lawyer. When the case settles or the plaintiff wins and the attorney collects, is the amount of the contingency fee income to the plaintiff? The Tax Court takes that position, which becomes even more serious when the alternative minimum tax is considered which often prevents it from being deductible. Now the Supreme Court has agreed to decide. The NY Times headlines it this way, Supreme Court to Review Tax Dispute Over Judgments. Of the two cases in which the Court granted cert. we had talked about the 6th Circuit decision, Banks, here earlier.

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