- 60 -
* * *
Respondent is correct that amounts awarded for delay in payment
in connection with government takings constitute ordinary income.
Petitioner, however, has set forth a plausible interpretation of
the award that contradicts respondent’s assumption that the
tribunal intended by the disputed amount to award Aminoil for a
delay in payment. Moreover, principally by Mr. Brower's
testimony, petitioner has convinced us that the disputed item is
not compensation for a delay in payment but, rather, is a
disguised payment for Kuwait’s premature termination of the
concession, and we so find.
D. Income Tax Consequences
Although we have found that the disputed amount was intended
by the tribunal as recompense for the concession, that does not
fully resolve the tax consequences attending its receipt.
Petitioner reported the disputed item as an amount realized on
the sale or other disposition of the concession. Since
petitioner believed that Aminoil’s adjusted basis in the
concession was zero, petitioner reported a gain of $55,147,935.
Petitioner reported that gain as a long-term capital gain under
the authority of section 1231. Petitioner reported interest of
$41,602,829, which reflected the “reasonable rate of interest,
which could be put at 7.5 percent” provided for in paragraph 178
(the 7.5-percent interest payment). In support of its claim that
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