Tuesday, January 25, 2005

Supreme Court: Attorney Fees Are Taxable Income For Plaintiffs

Click on the title to read the opinion, which is about plaintiff lawyers' contingency fees (not cases where fees are awarded on top of damages). I think both sides of the argument on this have merit; on the one hand, the funds are supposedly going striaght through to the attorney, so the plaintiff was not enriched by this amount; on the other hand, historically the entire award was considered income. Probably the strongest argument, though, is that Congress in 2004 modified the Internal Revenue Code to specify that these contingency fees are no longer part of the plaintiff's adjusted gross income, and the law was not retroactive (and these cases arose before the law was passed).