The 9th U.S. Circuit Court of Appeals has ruled that an Oregon plaintiff should not be taxed on the attorney-fee portion of his $8.7 million employment settlement because Oregon law gives attorney liens priority over every other kind of lien except tax liens.
Oregon law figures prominently in the San Francisco court�s opinion, which creates a circuit split on whether state law should be considered in federal tax court.
That's an interesting issue I'd never thought of before. The ABA Journal has the story here, including a link to the 9th Circuit's opinion.