- 11 - C. Whether There Was No Interest Because the RRC Agreement Replaced the State Court Judgment Petitioners contend that no part of the $839,000 payment was for interest because (1) the RRC agreement replaced the State court judgment; (2) as a result, there was no judgment; and (3) if there was no judgment, there was no interest. We disagree. The U.S. Court of Appeals for the First Circuit rejected that argument in Rozpad v. Commissioner, 154 F.3d at 3-4, and held that a settlement that allocates along the same lines for damages and interest as a prior jury verdict and judgment that included separately stated damages and interest includes a pro rata share of interest. Id. (citing Robinson v. Commissioner, 70 F.3d 34, 38 (5th Cir. 1995), affg. in part and revg. in part 102 T.C. 116 (1994)). In Rozpad v. Commissioner, supra at 4, the Court of Appeals stated that, absent a contrary allocation (as in McShane), it is fair to assume that interest and damages compose the same proportion of a settlement as of the prior judgment replaced by that settlement. Consistent with Rozpad, we conclude that the settlement paid by LPCF to petitioners included interest and damages in the same proportion as the prior State court judgment. Petitioners’ contention that the holding in Rozpad does not apply here because it was decided by the U.S. Court of Appeals for the First Circuit misses the mark. We followed Rozpad in Greer v. Commissioner, T.C. Memo. 2000-25, where we decidedPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011