Christopher J. and Vickilynn M. McCann - Page 11

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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                 
               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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