Trees and Fruit: How Fee Agreements May Change the Taxation of Attorney’s Fees

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Recorded On: 12/10/2014

The structure of fee agreements plays a significant role in the taxation of attorneys' fees. The Supreme Court has held that traditional contingency fee agreements constitute impermissible assignments of taxable income ("fruit") from clients to their attorneys. The NACA Tax Initiative, however, has been exploring an as-of-yet untested theory that a nontraditional structure for fee agreements—transfer of the income-generating asset ("tree") rather than the income itself ("fruit")—may eliminate clients' tax liabilities on attorneys' fees paid under fee-shifting statutes.

What You Will Learn

*   How to understand this nontraditional structure for fee agreements
*    How you may be able to address clients’ tax liabilities using a draft of model language for fee agreements
*    What NACA’s Tax Initiative is doing next to test the new fee agreement

Ayalon Eliach

Ayalon Eliach has been working on the NACA Tax Initiative since 2014. Prior to that, he practiced tax law at Roberts & Holland LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP in New York City. He holds a JD, cum laude, from Harvard Law School and a BA, summa cum laude, from Yale University. His views on tax law have appeared in various publications, including the New York Times and the NYU Review of Law & Social Change.