Lemonade from Lemons: The Solution to Taxation of the Contingent Fee Portion of Damage Awards
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Authors
Reece, Sharon
Issue Date
2004
Volume
37
Issue
Type
Journal Article
Language
Keywords
Alternative Title
Abstract
FIRST PARAGRAPH(S)|The taxability of a client's damage award is a palpable concern which adds to the already long list of concerns for an attorney litigating a suit. The Internal Revenue Code currently requires taxpayers to report most damage awards as income, with the exception of awards resulting from physical injury or illness. Additionally, after the award is paid, to the taxpayer/client, the taxpayer in turn pays the attorney and this reduces the award even further. Taxpayers have argued, and some courts have agreed, that fees paid under contingent fee agreements should be excluded from the taxable portions of damage awards, where the fee is paid directly by the defendant to the lawyer and was never paid to the taxpayer/client. This paper will examine the dueling arguments and the competing policies in this area and advance a solution which could rectify the inequity without compromising jurisprudential analysis.|You successfully litigate a wrongful termination tort claim for your client, Mrs. Smith, to whom the jury awards $1,000,000 in punitive damages, and of which you are due one-third under a contingent fee agreement. Consider the following scenarios...
Description
Citation
37 Creighton L. Rev. 305 (2003-2004)
Publisher
Creighton University School of Law