Contingent attorney's fees.
In David Raymond David Raymond is the founder and guitarist/singer for Buffalo, NY based band Damiera External links
A deduction from a taxpayer's taxable adjusted gross income that is made up of deductions for money spent on certain goods and services throughout the year. subject to the 2%-of-acljusted-gross-income floor. Because the taxpayer was subject to the alternative minimum tax, the fees were completely nondeductible non·de·duct·i·ble
Not deductible, especially for income-tax purposes.
Adj. 1. nondeductible - not allowable as a deduction
deductible - acceptable as a deduction (especially as a tax deduction) .
There is a huge conflict among the circuits on whether a directly paid contingency fee is income to the plaintiff. Courts addressing the issue have generally recognized that state law determines the nature of the legal interests in property, while Federal law determines the tax consequences of the receipt or disposition of property. The Second Circuit now agrees with the First, Third, Fourth, Seventh, Tenth and Federal Circuits and the Tax Court in taxing plaintiffs on contingent fees paid to their attorneys. The Fifth, Sixth and Eleventh Circuits, however, have permitted clients to escape tax on contingent attorney fees. The Ninth Circuit has reached different results depending on state law. For a discussion of Raymond, see "Tax Trends" p. 181, this issue.