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INCOMING! TAX SHADOW OVER JCA SETTLEMENTS

Mike Fox raises a red flag about potential future pain for employment law clients whose attorneys were paid contingency fees for cases settled before Oct. 22, 2004, when Congress passed the American Jobs Creation Act of 2004.

The Supreme Court ruled Monday (Commissioner of Internal Revenue v. Banks), Fox writes, that:

"...[T]he entire amount of a settlement, including the portion to be paid to the attorney under a contingency fee agreement is included in the gross income of the plaintiff for the year of the payment. While the plaintiff is entitled to a deduction it often does not remove the pain because of the alternative minimum tax..."

More here.

Posted by Laurel Newby on January 25, 2005 at 10:19 AM | Permalink | TrackBack (0)

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