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change the fact that petitioner's legal costs were all
attributable to his business activity. Pursuant to South
Carolina law, see Oxford Fin. Cos. v. Burgess, 402 S.E.2d 480,
482 (S.C. 1991); Rhode v. Ray Waits Motors, Inc., 74 S.E.2d 823,
825 (S.C. 1953); see also Sherrill White Constr., Inc. v. South
Carolina Natl. Bank, 713 F.2d 1047, 1051-1052 (4th Cir. 1983),
and the judge's instructions, the jury in the Academy lawsuit
awarded petitioner both actual and punitive damages on his
conversion claim.2 The fact that petitioner received two
different types of damages on his single claim of conversion does
not mean, as respondent would have us hold, that the claim is
bifurcated into two claims solely for purposes of applying the
Federal income tax laws. Contrary to respondent's position in
this case, the various types of damages which petitioner received
on his conversion claim do not dictate whether his legal costs
must be apportioned between his business and nonbusiness
2 We recognize that South Carolina law does not provide that
punitive damages are awarded in every case in which a tortfeasor
is held liable for an act of conversion. See Sherrill White
Constr., Inc. v. South Carolina Natl. Bank, 713 F.2d 1047,
1051-1052 (4th Cir. 1983) ("in order to recover punitive damages
[under South Carolina law] there must be more than mere
conversion. There must be malice, ill will, a conscious
indifference to the rights of others, or a reckless disregard
thereof."; citations and quotation marks omitted). The fact that
the converter's degree of culpability enters into an award of
punitive damages under South Carolina law, however, does not
change the fact that the origin and character of a claim for
punitive damage under that law is an act of conversion, which, in
this case, stems from petitioner's business activity.
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