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the settlement payment it paid. In the Polskys’ notice,
respondent determined that $4,856,922 of the $19,866,922
settlement payment reported in the Polskys’ 1994 return as long-
term capital gain was instead interest income. In both notices,
respondent determined that the section 6662 accuracy-related
penalty was applicable with respect to the taxable years ended in
1994.
OPINION
Indeck argues that the $19,886,922 settlement payment
consisted of a $15,030,000 purchase price for Mr. Polsky’s 30
Indeck shares and $4,856,922 in deductible interest, because both
the parties’ intent and the substance of the Settlement Agreement
contemplated the payment of $4,856,922 as interest to compensate
Mr. Polsky for the delay in receiving $15,030,000 for his shares
after January 31, 1991. Indeck further contends that the Polskys
are estopped from denying that the $19,886,922 settlement payment
includes interest under the doctrine of judicial estoppel. The
Polskys contend that the entire $19,886,922 settlement payment
constitutes the purchase price for the shares, based on the
express allocation of the entire amount to purchase price in the
parties’ written agreement, and the absence of any “indebtedness”
7(...continued)
Polskys recharacterized $4,856,922 of long-term capital gain as
interest income. Since the latter figure is the appropriate
rounding of the actual $4,856,921.85 in dispute, we use the
latter figure throughout this opinion.
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