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Misassigning Income: The Supreme Court And Attorneys' Fees, Stephen B. Cohen
Misassigning Income: The Supreme Court And Attorneys' Fees, Stephen B. Cohen
Georgetown Law Faculty Publications and Other Works
This past term's Supreme Court decision in Commissioner v. Banks and Commissioner v. Banaitis distorts foundational principles, known as assignment of income law, which help identify the person who must report income for federal tax purposes. The Court holds that assignment of income principles require a plaintiff to report as income the portion of a recovery paid to the plaintiffs attorney as a contingent fee. As a result, the plaintiff is taxed at excessively high rates, which may in some cases equal or exceed a confiscatory 100%. Taxing the plaintiff on the attorney-fee portion of a recovery also undermines the …