Commissioner v. Banks
Case Date: 07/10/2025
|
Commissioner v. Banks, 543 U.S. 426 (2005), together with Commissioner v. Banaitis, was a case decided before the Supreme Court of the United States, dealing with the issue of whether the portion of a money judgment or settlement paid to a taxpayer's attorney under a contingent-fee agreement is income to the taxpayer for federal income tax purposes. The Supreme Court held when a taxpayer's recovery constitutes income, the taxpayer's income includes the portion of the recovery paid to the attorney as a contingent fee.[1] Employment cases are an exception to this Supreme Court ruling because of the Civil Rights Tax Relief in the American Jobs Creation Act of 2004.[2] The Civil Rights Tax Relief amended Internal Revenue Service § 62(a) to permit taxpayers to subtract attorney’s fees from gross income in arriving at adjusted gross income.[3]
|