J.K. Lasser Daily Tax Tips

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Tax on Assigned Contingent Fee

An attorney who took a medical malpractice case on a contingent fee basis agreed to split the net fee with his ex-wife pursuant to their divorce agreement. After a favorable settlement, the attorney take was approximately $40,000 after expenses, half of which went to his ex-wife. Each paid tax on his or her share. The attorney argued that his partial assignment of the fee could shift the tax liability because collection was contingent on the outcome of the lawsuit. However, the IRS and the Tax Court held that the attorney was liable for the tax on the entire contingent fee, and an appeals court agreed. The attorney transferred only the right to receive income. Although his fee was contingent upon the successful outcome of the case, once the fee materialized, it was indisputably compensation for his personal services.

• 11/21/2009 - Direct Transfer From HRA to HSA

• 11/20/2009 - Reimbursed Cosmetic Surgery

• 11/19/2009 - COBRA Premium Reduction for Laid-Off Workers

• 11/18/2009 - COBRA Required Despite Other Coverage

• 11/17/2009 - Electing Immediate Tax on Restricted Stock

• 11/16/2009 - Tax Due on Option Exercise

• 11/15/2009 - Possible AMT Liability for ISO

• 11/14/2009 - Terrorist Attacks

• 11/13/2009 - Refund After Retroactive Military Disability Determination

• 11/12/2009 - Job-Related Injury or Illness

• 11/11/2009 - Is Sick Leave Tax-Free Workers Compensation?

• 11/10/2009 - Primary Purpose Determination

• 11/9/2009 - Charitable Split-Dollar Insurance

• 11/8/2009 - Repayments Exceeding $3,000

• 11/7/2009 - Penalty and Interest on Nonqualified Deferred Compensation

• 11/6/2009 - Law Violation Not Deductible

• 11/5/2009 - Earned Commissions Credited to Your Account

• 11/4/2009 - Tax on Assigned Contingent Fee

• 11/3/2009 - Tips Must Be Reported

• 11/2/2009 - Severance Pay Taxable

• 11/1/2009 - Recipients Taxed on Certain Gifts and Bequests From Expatriates

• 10/31/2009 - Departure Permit

• 10/30/2009 - Is 2009 Your First Year of Residency?

• 10/29/2009 - IRD Not Included on Decedent Final Return

• 10/28/2009 - Promptly Closing the Estate

• 10/27/2009 - Kiddie Tax May Apply to Investment Income

• 10/26/2009 - Special Separate Household Rule for Parent

• 10/25/2009 - Advantages of Head of Household Status

• 10/24/2009 - Possible Estate Insolvency

• 10/23/2009 - Reporting Income of Deceased Spouse

• 10/22/2009 - Unpaid Tax on Correct Return

• 10/21/2009 - Actual Knowledge Bars Relief

• 10/20/2009 - Deadline for Innocent Spouse Election

• 10/19/2009 - IRS Must Notify Non-Electing Spouse

• 10/18/2009 - Knowledge May Bar Innocent Spouse Relief

• 10/17/2009 - Income Splitting Barred to California Registered Domestic Partner

• 10/16/2009 - Nonresident Alien Becomes Resident

• 10/15/2009 - Election To File a Joint Return

• 10/14/2009 - Spouse in Combat Zone

• 10/13/2009 - Switching From Separate to Joint Return

• 10/12/2009 - Charity Reports Transfer Within Three Years

• 10/11/2009 - Split-Dollar Insurance Arrangements

• 10/10/2009 - Donating Vacation Home Use Not Advisable

• 10/9/2009 - Recapture of Deductions for Certain Fractional Interests

• 10/8/2009 - Appraisal Required

• 10/7/2009 - Donations of Personal Creative Works

• 10/6/2009 - Recapture of Deduction for Property Sold Within Three Years

• 10/5/2009 - Tangible Personal Property

• 10/4/2009 - Appraisal Fees

• 10/3/2009 - Long-Term Holding Period