Schneer v. Commissioner

97 T.C. 643 (1991)

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Nature of the Case

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Facts

P was a practicing attorney during the years 1983, 1984, and 1985. Until February 25, 1983, P was an associate with the law firm of Ballon, Stoll & Itzler (BSI). BSI was a partnership. P was not a partner in BSI and he did not share in general partnership profits. P got a fixed or set salary and a percentage of any fees which arose from clients P brought or referred to the firm. When P left BSI he had an understanding that he would continue to receive his percentage of fees that arose from clients he had referred when he was an associate. P was expected to consult regarding clients he referred to BSI and whose fees were to be shared. P would have become entitled to his percentage of the fees even if he had not been called upon to consult. P became a partner in the law firm of Bandler & Kass (B&K), and on August 1, 1985, P became a partner in the law firm of Sylvor, Schneer, Gold & Morelli (SSG&M). The agreement between the partners of B&K was that each partner would receive a percentage of the partnership profits derived from all fees received beginning the date the partner joined the partnership. In addition, P agreed to turn over to the partnership all legal fees received after joining the partnership, regardless of whether the fees were earned in the partnership's name or from the partnership's contractual relationship with the client. The same agreement existed between the partners of SSG&M, including P. During 1984 and 1985, BSI remitted $21,329 and $ 10,585 to P. P turned those amounts over to the appropriate partnership. D determined deficiencies in the amounts of $49,708 and $25,252, respectively. P petitioned the Tax Court.