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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 decided
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