Robert J. and Anne L. Wilson - Page 21

                                       - 21 -                                         
          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               

Page:  Previous  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  Next

Last modified: May 25, 2011