Journal article
HORIZONTAL EQUITY AND THE TAX CONSEQUENCES OF ATTORNEY-CLIENT FEE AGREEMENTS
Temple Law Review, Vol.74, pp.387-837
01 Jul 2001
Abstract
Introduction In the movie It Could Happen To You, Nicolas Cage leaves waitress Bridget Fonda a tip consisting of half of a lottery ticket. When he wins the lottery, he has income. The issue becomes, did he give Fonda the right to half the ticket or did he give her half of his earnings from the ticket? If he gave Fonda the right to half the ticket, he will be taxed on only half of the winnings. On the other hand, if he gave her half of his earnings from the ticket, he will be taxed on the entire amount before giving half to Fonda. This scenario corresponds with the taxation of attorney fees paid under contingent fee agreements. Does the client give away a portion of the claim, or does the client earn the amounts received from the judgment and then pay the attorney from that judgment? To illustrate the difference in taxation of the two possibilities, assume that two people, each with a prospective lawsuit, contract with an attorney to represent them in the lawsuit. One client agrees to pay the attorney on an hourly basis, 1 while the other client agrees to pay the attorney on a contingent fee basis, 2 promising to pay the attorney thirty percent of any judgment received. The first client's lawsuit settles for $ 100,000. This client includes the $ 100,000 in her gross income for the taxable year and pays the attorney fees from that amount. The second ...
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Details
- Title
- HORIZONTAL EQUITY AND THE TAX CONSEQUENCES OF ATTORNEY-CLIENT FEE AGREEMENTS
- Creators
- Kathryn J. Ball
- Publication Details
- Temple Law Review, Vol.74, pp.387-837
- Publisher
- Temple University of the Commonwealth System of Higher Education Temple Law Review
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Thomas R. Kline School of Law
- Other Identifier
- 991022052304204721