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compensation under State law. Kieselbach v. Commissioner, 317
U.S. 399, 403 (1943); Tiefenbrunn v. Commissioner, 74 T.C. 1566,
1571 (1980); Ferreira v. Commissioner, 57 T.C. 866, 871 (1972);
Fulks v. Commissioner, T.C. Memo. 1989-190 (involving Maryland
quick-take condemnation).
Petitioner next argues that, even if prejudgment interest is
taxable as ordinary income, no portion of the $61,604 included
prejudgment interest. To determine whether interest was included
in the condemnation settlement, we must examine the facts and
circumstances of the case. Smith v. Commissioner, 59 T.C. 107
(1972). Principally, petitioner relies on the fact that a
schedule attached to the letter which included the State's final
installment of the condemnation award indicated that no
prejudgment interest was payable. We reject this argument, as
the following facts and circumstances indicate that prejudgment
interest was included in the $61,604: (1) Prejudgment interest
is a required component of just compensation under Maryland law,
see King v. State, supra at 1035; (2) in the negotiations
preceding the agreed upon condemnation award, prejudgment
interest was included in the proposed settlement amounts, with
the only issue being the principal amount upon which it would be
computed and the rate of interest to be used; (3) on the date the
settlement was reached, petitioners' counsel specifically asked
the circuit court to include prejudgment interest in the court's
judgment; and (4) in a stipulation and waiver entered into by
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