This issue involves the cases of John W. Banks II and Sigitas J. Banaitis (plaintiffs). Banks was fired from his job in 1986. He filed an employment discrimination suit and hired an attorney on a contingent fee basis. In 1990, Banks settled his case for $464,000. Banks paid $150,000 of the settlement to his attorney in accordance with their contingent fee agreement. Banks did not include the entire $464,000 in his income tax return for that year. The Commissioner (defendant) determined a deficiency in that amount. The Tax Court ruled the entire settlement, including the $150,000 paid to Banks’ attorney, was includable in Banks’ income. The Court of Appeals for the Sixth Circuit reversed in part, ruling that the $150,000 was not income to Banks. In an unrelated case, Banaitis was employed as the vice president and loan officer of a bank. He was fired when he resisted pressure from his superiors to breach his fiduciary duties. Banaitis filed suit in Oregon state court against his former employers. He hired an attorney on a contingent fee basis. After trial, the parties settled. The defendant bank paid Banaitis $4,864,547. Under the terms of a statutory fee shifting provision, the defendants also paid Banaitis’ attorney $3,864,012. Banaitis included the amount he received from the settlement in his income tax return for that year, but did not include the fee paid by the defendants to his attorney. The Commissioner determined a deficiency in the amount of the attorney’s fees. The Tax Court upheld the deficiency. The Court of Appeals for the Ninth Circuit reversed. The United States Supreme Court granted certiorari in both cases.