October Term 2004 · Docket 03-892
Does a taxpayer owe tax on attorney fees deducted from a civil rights settlement?
The dispute centers on whether a client must report the full settlement amount or only the net amount received after paying legal fees.
Verified source milestones
- — An official oral-argument transcript was verified.
- — An official oral-argument transcript was verified.
The arguments, in order
This case may have been argued more than once. Each entry below uses that session's official transcript. Later arguments do not erase earlier ones.
Argument 1 ·
What happened at the argument
The government contends that the Internal Revenue Code defines gross income broadly.
The taxpayer contends that the assignment of income doctrine does not apply.
The taxpayer argues that unrelated persons jointly generating income changes the tax treatment.
Read the official transcript for this argument · Official argument details
Sources used for this argument breakdown
- Official Supreme Court Transcript — file page 30, lines 31-41 — Transcript, file page 30, lines 31-41
- Official Supreme Court Transcript — file page 4, lines 17-41 — Transcript, file page 4, lines 17-41
- Official Supreme Court Transcript — file page 4, lines 43-47 — Transcript, file page 4, lines 43-47
- Official Supreme Court Transcript — file page 4, lines 5-15 — Transcript, file page 4, lines 5-15
- Official Supreme Court Transcript — file page 44, lines 1-23 — Transcript, file page 44, lines 1-23
- Official Supreme Court Transcript — file page 5, lines 17-19 — Transcript, file page 5, lines 17-19
- Official Supreme Court Transcript — file page 5, lines 29-33 — Transcript, file page 5, lines 29-33
- Official Supreme Court Transcript — file page 5, lines 39-45 — Transcript, file page 5, lines 39-45
- Official Supreme Court Transcript — file page 55, lines 5-54 — Transcript, file page 55, lines 5-54
- Official Supreme Court Transcript — file page 57, lines 5-5 — Transcript, file page 57, lines 5-5
- Official Supreme Court Transcript — file page 6, lines 29-35 — Transcript, file page 6, lines 29-35
- Official Supreme Court Transcript — file page 6, lines 45-1 — Transcript, file page 6, lines 45-1
- Official Supreme Court Transcript — file page 7, lines 5-9 — Transcript, file page 7, lines 5-9
- Official Supreme Court Transcript — file page 8, lines 25-27 — Transcript, file page 8, lines 25-27
- Official Supreme Court Transcript — file page 8, lines 43-54 — Transcript, file page 8, lines 43-54
- Official Supreme Court Transcript — file page 8, lines 9-19 — Transcript, file page 8, lines 9-19
- Official Supreme Court Transcript — file page 9, lines 15-23 — Transcript, file page 9, lines 15-23
- Official Supreme Court Transcript — file page 9, lines 5-7 — Transcript, file page 9, lines 5-7
A citizen's guide to the whole case
What this case is about
The case asks if a taxpayer must include attorney fees in gross income. The government argues the full recovery is taxable. The taxpayer argues only the net amount is taxable.
Official sources for this section
- Official Supreme Court Transcript — file page 30, lines 31-41 — Transcript, file page 30, lines 31-41
- Official Supreme Court Transcript — file page 4, lines 17-41 — Transcript, file page 4, lines 17-41
- Official Supreme Court Transcript — file page 44, lines 1-23 — Transcript, file page 44, lines 1-23
- Official Supreme Court Transcript — file page 55, lines 5-54 — Transcript, file page 55, lines 5-54
How the case got here
The Supreme Court heard oral argument in this case on November 1, 2004.
Official sources for this section
- Official Supreme Court Transcript — file page 4, lines 5-15 — Transcript, file page 4, lines 5-15
- Official Supreme Court Transcript — file page 57, lines 5-5 — Transcript, file page 57, lines 5-5
What each side wants
The government wants the taxpayer to report the full settlement amount as income.
The taxpayer wants to report only the net amount received after paying fees.
Official sources for this section
- Official Supreme Court Transcript — file page 30, lines 31-41 — Transcript, file page 30, lines 31-41
- Official Supreme Court Transcript — file page 4, lines 17-41 — Transcript, file page 4, lines 17-41
- Official Supreme Court Transcript — file page 44, lines 1-23 — Transcript, file page 44, lines 1-23
- Official Supreme Court Transcript — file page 55, lines 5-54 — Transcript, file page 55, lines 5-54
What each side says
The government argues that gross income includes all income from any source.
The taxpayer argues that the assignment of income doctrine does not apply here.
Official sources for this section
- Official Supreme Court Transcript — file page 30, lines 31-41 — Transcript, file page 30, lines 31-41
- Official Supreme Court Transcript — file page 4, lines 17-41 — Transcript, file page 4, lines 17-41
- Official Supreme Court Transcript — file page 44, lines 1-23 — Transcript, file page 44, lines 1-23
- Official Supreme Court Transcript — file page 55, lines 5-54 — Transcript, file page 55, lines 5-54
What the justices asked
Justice O'Connor asked about attorney fees in class action suits.
Justice Souter asked why the rule does not apply to class actions.
Official sources for this section
- Official Supreme Court Transcript — file page 4, lines 43-47 — Transcript, file page 4, lines 43-47
- Official Supreme Court Transcript — file page 5, lines 17-19 — Transcript, file page 5, lines 17-19
- Official Supreme Court Transcript — file page 5, lines 29-33 — Transcript, file page 5, lines 29-33
- Official Supreme Court Transcript — file page 5, lines 39-45 — Transcript, file page 5, lines 39-45
- Official Supreme Court Transcript — file page 57, lines 5-5 — Transcript, file page 57, lines 5-5
- Official Supreme Court Transcript — file page 6, lines 29-35 — Transcript, file page 6, lines 29-35
- Official Supreme Court Transcript — file page 6, lines 45-1 — Transcript, file page 6, lines 45-1
- Official Supreme Court Transcript — file page 7, lines 5-9 — Transcript, file page 7, lines 5-9
- Official Supreme Court Transcript — file page 8, lines 25-27 — Transcript, file page 8, lines 25-27
- Official Supreme Court Transcript — file page 8, lines 43-54 — Transcript, file page 8, lines 43-54
- Official Supreme Court Transcript — file page 8, lines 9-19 — Transcript, file page 8, lines 9-19
- Official Supreme Court Transcript — file page 9, lines 15-23 — Transcript, file page 9, lines 15-23
- Official Supreme Court Transcript — file page 9, lines 5-7 — Transcript, file page 9, lines 5-7
Why it matters
This case determines how taxpayers report civil rights settlements. It affects the calculation of taxable income for many litigants. The outcome defines the scope of federal taxing power.
Official sources for this section
- Official Supreme Court Transcript — file page 30, lines 31-41 — Transcript, file page 30, lines 31-41
- Official Supreme Court Transcript — file page 4, lines 17-41 — Transcript, file page 4, lines 17-41
- Official Supreme Court Transcript — file page 44, lines 1-23 — Transcript, file page 44, lines 1-23
- Official Supreme Court Transcript — file page 55, lines 5-54 — Transcript, file page 55, lines 5-54
What happens next
This article currently covers the argument record. Use the official docket link for later case activity.
Official sources for this section
- Official Supreme Court Transcript — file page 4, lines 43-47 — Transcript, file page 4, lines 43-47
- Official Supreme Court Transcript — file page 4, lines 5-15 — Transcript, file page 4, lines 5-15
- Official Supreme Court Transcript — file page 5, lines 17-19 — Transcript, file page 5, lines 17-19
- Official Supreme Court Transcript — file page 5, lines 29-33 — Transcript, file page 5, lines 29-33
- Official Supreme Court Transcript — file page 5, lines 39-45 — Transcript, file page 5, lines 39-45
- Official Supreme Court Transcript — file page 57, lines 5-5 — Transcript, file page 57, lines 5-5
- Official Supreme Court Transcript — file page 6, lines 29-35 — Transcript, file page 6, lines 29-35
- Official Supreme Court Transcript — file page 6, lines 45-1 — Transcript, file page 6, lines 45-1
- Official Supreme Court Transcript — file page 7, lines 5-9 — Transcript, file page 7, lines 5-9
- Official Supreme Court Transcript — file page 8, lines 25-27 — Transcript, file page 8, lines 25-27
- Official Supreme Court Transcript — file page 8, lines 43-54 — Transcript, file page 8, lines 43-54
- Official Supreme Court Transcript — file page 8, lines 9-19 — Transcript, file page 8, lines 9-19
- Official Supreme Court Transcript — file page 9, lines 15-23 — Transcript, file page 9, lines 15-23
- Official Supreme Court Transcript — file page 9, lines 5-7 — Transcript, file page 9, lines 5-7
Official Court provenance
Official docket and case history · Official Supreme Court oral-argument detail page
Title and summary sources
- Official Supreme Court Transcript — file page 30, lines 31-41 — Transcript, file page 30, lines 31-41
- Official Supreme Court Transcript — file page 4, lines 17-41 — Transcript, file page 4, lines 17-41
- Official Supreme Court Transcript — file page 44, lines 1-23 — Transcript, file page 44, lines 1-23
- Official Supreme Court Transcript — file page 55, lines 5-54 — Transcript, file page 55, lines 5-54
- Official Supreme Court Transcript — file page 30, lines 31-41 — Transcript, file page 30, lines 31-41
- Official Supreme Court Transcript — file page 4, lines 17-41 — Transcript, file page 4, lines 17-41
- Official Supreme Court Transcript — file page 44, lines 1-23 — Transcript, file page 44, lines 1-23
- Official Supreme Court Transcript — file page 55, lines 5-54 — Transcript, file page 55, lines 5-54
Revision history
- Revision 1 · Official Transcript ·
Correction: Rewritten to the concise citizen-facing editorial standard.
- Revision 2 · Official Transcript ·
Correction: Migrated to the dated official Court activity contract without model use.