Commissioner v. Banks
United States Supreme Court
543 U.S. 426 (2005)
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.
Rule of Law
Holding and Reasoning (Kennedy, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.
Here's why 173,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 14,000 briefs, keyed to 188 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.