Contingency Fee Trap Under Tax Reform: Avoiding Hidden Settlement Obstacles and Malpractice Issues

Note: CPE credit is not offered on this program

A live 90-minute CLE webinar with interactive Q&A


Tuesday, October 29, 2019 (in 10 days)

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

This CLE webinar will discuss the hidden "contingency fee trap" caused by 2017 tax reform legislation, which impacts most contingency fee plaintiffs. This webinar will explore the hidden obstacles to settlement and possible malpractice issues that may arise for contingency fee attorneys under the new law.

Description

The U.S. Supreme Court in Commissioner v. Banks conclusively established that in certain types of contingency fee arrangement cases, the plaintiff must include the attorney fee portion of the recovery as gross income on the plaintiff's Form 1040. That is, a plaintiff may not report their recovery net of the attorney fee.

Under tax reform, there is no longer any available corresponding, separate deduction for attorney fees from 2018 through 2025, except for in particular types of litigation. The combination of the Supreme Court ruling and the changes to the tax law is very adverse for plaintiffs.

Including the attorney portion of the recovery in gross income without a corresponding deduction results in substantially higher federal and state income taxes for the plaintiff because the attorney fees cannot be "written off." Thus, the "contingency fee trap" leaves plaintiffs with a much lower "net" recovery. Plaintiffs may see 80% or more of their recovery go to taxes and attorney fees, particularly in states with high income tax rates.

Listen as our expert panel explains the contingency fee trap, who it impacts, and the best tactics for mitigating it. Our panelists will also walk attendees through case studies and examples of the contingency fee trap to show how this issue bears out in real life.

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Outline

  1. Overview of contingency fee tax treatment before and after the 2017 tax reform
  2. Case studies and figures with redacted real life examples of the contingency fee trap
  3. Discussion of what tactics will and will not work to sidestep the fee trap under the wording of the tax code and Commissioner v. Banks
  4. Practice tips for attorneys to provide adequate counsel on the contingency fee trap and avoid possible malpractice claims

Benefits

The panel will review these and other high priority issues:

  • What is the contingency fee trap, and how was it created?
  • Who does the contingency fee trap impact?
  • What are the real-life implications and effects of the contingency fee trap?
  • How can practitioners best mitigate the contingency fee trap?

Faculty

Krause, Phillip
Phillip M. Krause, CSSC, CLMP

Managing Director of Strategic Planning
Ringler Associates

Mr. Krause serves as the Managing Director of Strategic Planning for Ringler Associates, the largest and oldest...  |  Read More

Wood, Robert
Robert W. Wood

Managing Partner
Wood LLP

Mr. Wood has broad experience in corporate, partnership and individual tax matters. Concerning the tax treatment of...  |  Read More

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Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

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