Srivastava v. Commissioner

JERRY E. SMITH, Circuit Judge:

This challenge to a notice of deficiency requires us to determine whether the portion of a judgment or settlement payable to a taxpayer’s attorney pursuant to a contingent fee agreement governed by Texas law constitutes gross income under § 61 of the Internal Revenue Code, 26 U.S.C. § 61. Following Cotnam v. Commissioner, 263 F.2d 119 (5th Cir.1959), which excluded from gross income contingent fees governed by Alabama law, we conclude that contingent fees paid according to Texas law are also excludable.

We therefore reverse the Tax Court’s contrary conclusion and…