Case: Litigation Support Payments Contingent on Outcome Considered Income Not Loans (T.C. Memo) (IRC §61)

Litigation support payments whose repayment was contingent on the outcome of the case constituted gross income currently taxable under tax code Section 61(a), the U.S. Tax Court held in a memorandum opinion. Taxpayer entered into litigation support agreements with counter-parties who had aligned interests with the plaintiffs in order to help fund the action. If Taxpayer won, the payments were returned out of the case proceeds. If Taxpayer lost, the payment was kept. Taxpayer did not report the litigation support payments as gross receipts on Schedule C. Taxpayer argued that the payments were loans, not includible in income. ...