Where did it say the lawyer was to pay taxes on his fee? All I read was that the winner was to pay tax on the total amount.
Well, I can see how the IRS can twist it that way. If you won a lawsuit for a $ Million and $ 500K in legal fees, the IRS is saying you got $1.5 Mil and you in turn paid the lawyer $500K.
That is the theory, but the actual way it works is the lawyer gets the money, subtracts their fee and sends/gives the remainder to the plaintiff. Now how about if the ENTIRE amount was able to the lawyer, and then just the result sent to the plaintiff, which is all he ever sees anyway, is also taxable to him. Wow! that would be a shock.
To: det dweller too
You are correct. If the plaintiff wins $1,000,000 and the fee is 35% then the plaintiff pays tax on the $1 million of approximately $390,000 Federal and $80,000 State. He then gives the lawyer his fee of $350,000 so the plaintiff ends up with $180,000. So who made the money? The lawyer and the tax man.
posted on 01/27/2005 4:26:25 AM PST
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