This section contains the nature of the case and procedural background.

P is an attorney who brought a medical malpractice lawsuit on behalf of the McNarys on a contingent fee basis. Before the suit settled, Pand Carol divorced. The divorce agreement provided that P and Carol would split, after deduction of expenses, the contingent fee earned from the McNarys' lawsuit. The suit settled and the fee was split. P paid tax on his portion and Carol paid tax on hers. In a fit of rage, the Commissioner (D) determined that P was liable for the tax on the entire amount of the contingent fee, as well as an addition for negligence. The Tax Court ruled for D and P appealed.

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