Contingency Payment Considered Part of Taxpayer's Gross Income

A taxpayer who won a recovery of backpay and paid his attorneys on a contingency fee basis must include the contingency payment figure in his gross income for tax purposes, the 2nd Circuit has ruled in an issue that has split other appeals courts. The man argued that he never received the funds and had no right to them due to a lien under state law, but the court found no reason to treat contingent fee arrangements differently than other arrangements.

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