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and adopts the opinion of the Special Trial Judge, which is set
forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
PANUTHOS, Chief Special Trial Judge: This matter is before
the Court on remand from the Court of Appeals for the Ninth Circuit.
See Talley Indus., Inc. & Consol. Subs. v. Commissioner, 116 F.3d 382
(9th Cir. 1997), revg. and remanding T.C. Memo. 1994-608. In Talley
Indus., Inc. & Consol. Subs. v. Commissioner, T.C. Memo. 1994-608, we
granted petitioner's motion for summary judgment in part--holding
that petitioner was entitled to a deduction of $2.5 million (less
$1,885 which was characterized as a "fine" pursuant to criminal
charges) reflecting the amount that petitioner paid to the
Government to settle its civil liability for submitting false claims
under certain Federal contracts. The Court of Appeals reversed and
remanded the case on the ground that "a genuine issue of material
fact exists as to the characterization and the purpose of the
$940,000 portion of the settlement." Talley Indus., Inc. & Consol.
Subs. v. Commissioner, 116 F.3d at 387. The Court of Appeals
summarized the matters to be decided on remand as follows:
If the $940,000 represents compensation to the
government for its losses, the sum is deductible. If,
however, the $940,000 represents a payment of double
damages [under the False Claims Act], it may not be
1(...continued)
in effect for the year in issue, unless otherwise indicated. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
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