- 53 -
as ordinary interest income, while Indeck was entitled to deduct
the latter as interest pursuant to section 163(a). The Federal
income tax treatment of the settlement payment to either party
was not argued by Mr. Polsky. Nothing in the record suggests
that the Federal income tax treatment was material or even
considered in the court’s decision to approve or enforce the
settlement. See UNUM Corp. v. United States, supra (judicial
estoppel does not preclude assertion of position on Federal
income tax treatment in subsequent proceeding where such
treatment not material to decision in earlier State proceedings).
Mr. Polsky’s assertion in the Lake County Lawsuit that the agreed
upon settlement payment included “interest” did not secure for
him any advantage in that proceeding. At most, the Lake County
Circuit Court accepted a formula for arriving at a payment to be
made by Indeck for Mr. Polsky’s shares, without regard to the
Federal income tax implications for either party.
We conclude that Indeck has not shown a clear inconsistency
in Mr. Polsky’s positions in the Lake County Lawsuit and herein,
or that Mr. Polsky secured a favorable settlement on the basis of
a contention that $4,856,922 of the settlement payment was
interest. We accordingly reject the application of judicial
estoppel in these cases.21
21 Indeck also argues, for the first time in its reply
brief, that the doctrine of equitable estoppel should be applied
(continued...)
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