Schneer v. Commissioner

Schneer (plaintiff), an attorney, left his associate position at Ballon, Stoll & Itzler (BSI), which agreed to pay him a percentage of fees from clients he had referred while there. Schneer later joined two different law-firm partnerships in succession, Bandler & Kass and then Sylvor, Schneer, Gold & Morelli, and under his partnership agreements with each firm he was obligated to contribute all legal fees he earned, even fees not earned through that partnership, to the partnership itself. Following those agreements, Schneer turned over the BSI referral fees he received in 1984 and 1985 to whichever firm he was a partner of at the time, and each firm treated the fees as partnership income divided among its partners, including Schneer, on their tax returns. The IRS (defendant) ruled the BSI fees were actually Schneer's individual income under the assignment-of-income doctrine, and Schneer petitioned the Tax Court.