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Re: [Maury_and_Baty] The real news of the day!

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  • Tamara
    Fascinating, Robert. Please keep us updated. Best, Tamara ... From: rlbaty50 To: Maury_and_Baty@yahoogroups.com Sent: Tuesday, November 02, 2004 7:20 AM
    Message 1 of 2 , Nov 2, 2004
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      Fascinating, Robert. Please keep us updated.

      ----- Original Message -----
      From: rlbaty50
      To: Maury_and_Baty@yahoogroups.com
      Sent: Tuesday, November 02, 2004 7:20 AM
      Subject: [Maury_and_Baty] The real news of the day!

      During November 1 oral arguments of the Banks and Banaitis cases, the
      Supreme Court justices searched for a legal theory to resolve the
      inequity of including in income the contingent attorney fee portion
      of a prevailing plaintiff's discrimination settlement.

      But the taxpayer and government lawyers were not prepared to discuss
      the one theory that several of the justices were most interested in:
      the one espoused by law professor Charles Davenport in an amicus
      curiae brief that suggested that contingent attorney fees should be
      treated as transaction costs.

      The Supreme Court granted certiorari in two contingent attorney fee
      cases, Commissioner v. John W. Banks II, 345 F.3d 373 (6th Cir. 2003)
      (No. 03-892), and Commissioner v. Sigitas J. Banaitis, 345 F.3d 1074
      (9th Cir. 2003) (No. 03-907). Both taxpayers, Banks and Banaitis,
      settled employment discrimination suits, and both lost in the Tax
      Court their cases to exclude part or all of the amounts recovered.
      Both cases were reversed on appeal concerning the contingent attorney
      fee portions of their recoveries. In so doing, the appeals courts'
      decisions took a position that is at odds with all the other circuits
      except the Fifth and Eleventh circuits.

      The issue has received attention from a variety of sources, including
      Congress, because the alternative minimum tax can apply and cause a
      prevailing plaintiff's tax liability to exceed the amount recovered.

      When it gets to the point where the government is charging more in
      tax than a taxpayer is actually receiving, "it is an appalling
      situation," declared Justice Ruth Bader Ginsburg.

      Justice Ginsburg was the first to raise the theory set forth in
      Davenport's amicus brief.

      A professor at Rutgers Law School in Newark, Davenport argued on
      brief that the legal fees in the Banks and Banaitis cases are
      transaction costs, not expenses. Transaction costs are expenditures
      that facilitate the transaction, in his view. The legal fees at issue
      were incurred to value the rights taken from taxpayers and then to
      dispose of the taxpayers' causes of action arising from tortious
      behavior, explains Davenport.

      Salmons said the government believes its assignment of income theory
      is the better approach to these cases.

      But Justice Scalia pressed the government to explain why the present
      cases are different from the treatment of lawyers' fees attendant to
      a real property sale. Why not treat them as "a conversion of a chose
      in action to a real money payment," he asked. In that event, all
      costs become part of the transaction, he said.

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