The United States Court of Appeals for the Eleventh Circuit heard the case about a real estate developer challenging the decisions by the United States Tax Court of the nature of amount he received from the assignment of his rights as plaintiff in a lawsuit. The petitioner entered into an agreement with a third party, agreeing to sell for the amount of $ 5,750,000 his position as plaintiff and all rights thereof in a lawsuit against land seller. At the meantime, the petitioner settled with another company to pay $ 600,000 to clear the company’s right of collection. The petitioner argued that the amount of money he received from assignment of rights constituted long-term capital gain, rather than taxable ordinary income. He also argued that the $ 600,000 payment should qualify as taxable deduction.
The Eleventh Circuit Court held for the petitioner that the amount the petitioner received under such assignment agreement should be characterized as capital gains to be taxed at a favorable rate, rather than normal income. The Court affirmed the Tax Court in denying individual’s deductible for the amounts paid to another company.
See Long v. Commissioner of IRS, No. 14-10288 (11th Cir. 2014), law.justia.com.
Posted by Jiaqi Wang, Associate Editor, Wealth Strategies Journal.