Duncan v. Commissioner
United States Tax Court
T.C. Memo. 2018–190. (2018)
- Written by Jamie Milne, JD
Facts
Self-employed attorney Dann Duncan (plaintiff) represented Keith Walker, a former police officer injured in the line of duty, in a suit against Walker’s former employer. Walker paid Duncan a flat fee of $2,500 at the outset of the suit. When the suit concluded 14 years later, Walker received a lump-sum payment of $360,000. Walker then gave Duncan a check for $30,000 although there was no evidence of a fee agreement requiring such a payment. Duncan and his wife did not report the $30,000 as income on their 2008 joint tax return, reasoning that the money was a nontaxable gift from Walker as the parties had become friends. The commissioner of internal revenue (commissioner) (defendant) disagreed, reasoning that Walker gave Duncan money from the suit proceeds as a form of compensation for Duncan’s services, making the money taxable income. The commissioner relied in part on the fact that Walker listed the payment to Duncan as a deductible legal expense on his own 2008 tax return. After the commissioner issued a notice of deficiency to Duncan, claiming that Duncan owed additional taxes, Duncan filed a petition in the United States Tax Court to contest the commissioner’s determination.
Rule of Law
Issue
Holding and Reasoning (Ashford, J.)
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