- 17 -
excess of its "singles" damages of $1.56 million. Moreover, the
settlement, by its very nature, reflects a compromise influenced
by a number of factors including the hazards of litigation, the
need for an expedited settlement, and possibly the character of
the payment. To accept petitioner's position, we would have to
ignore evidence that the Government was willing to accept the
settlement on the belief that a portion of the settlement in
excess of its "singles" damages would amount to a penalty. It
follows that we must proceed to consider the parties' intent, as
mandated by the Court of Appeals. See Talley Indus., Inc. &
Consol. Subs. v. Commissioner, 116 F.3d at 387-388.
A settlement agreement is treated like any other contract
for purposes of interpretation. See United Commercial Ins.
Serv., Inc. v. Paymaster Corp., 962 F.2d 853, 856 (9th Cir.
1992); see also Saigh v. Commissioner, 26 T.C. 171, 177
(1956); Fisher v. Commissioner, T.C. Memo. 1994-434. In the
case of an ambiguous contract, the Court may consider extrinsic
evidence, such as evidence of the parties' prior negotiations and
communications, in order to ascertain the parties' intent. See
California Pac. Bank v. SBA, 557 F.2d 218, 222 (9th Cir. 1977); 2
Restatement, Contracts 2d, sec. 214(c) (1981); see also United
Commercial Ins. Serv., Inc. v. Paymaster Corp., supra at 856;
Interpublic Group of Cos. v. On Mark Engg. Co., 381 F.2d 29, 32-
33 (9th Cir. 1967).
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