- 14 - Section 1.162-21(b)(2), Income Tax Regs., provides that compensatory damages paid to a Government do not constitute a fine or penalty. Deductions are a matter of legislative grace, and the taxpayer must show that he comes squarely within the terms of the law conferring the benefit sought. See Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); Welch v. Helvering, 290 U.S. 111, 115 (1933). Applying this principle in the instant case, petitioner bears the burden of proving that, in settling the Stencel matter, the parties intended for the entire $2.5 million payment (including the $940,000 portion of the payment that exceeded the Government's $1.56 million "singles" damages) to represent compensation to the Government for its losses. The first issue to be resolved is whether the parties intended the Stencel settlement to include double damages under the FCA. Although the settlement agreement does not characterize the $2.5 million payment, or any part thereof, as double damages, we conclude that the parties intended the settlement to include double damages under the FCA. In short, the parties' various offers and counteroffers repeatedly referred to the settlement as including double damages. Next, we must consider whether the purpose of the $940,000 double damage payment was to compensate the Government for itsPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011