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regulations promulgated thereunder, or from any
obligations created by this Stipulation.
Petitioner asked Deborah Pugh (Pugh), the Department of
Justice attorney who handled the qui tam case, whether the qui
tam payment was includable in gross income for Federal income tax
purposes. She told him she did not know and recommended that he
consult an attorney. Petitioner asked Pugh to omit the paragraph
quoted above, but she declined to do so. The Department of
Justice issued to petitioner a Form 1099-MISC, Miscellaneous
Income, showing that it had paid him $1,568,087 in 1997.
D. Petitioner’s Efforts To Determine the Tax Treatment of the
Qui Tam Payment
Petitioner and Mrs. Roco believed that their accounting and
tax backgrounds were sufficient to enable them to correctly
determine whether the qui tam payment was includable in gross
income for Federal income tax purposes. Petitioner and Mrs. Roco
researched tax cases, the Internal Revenue Code, Internal Revenue
Service (IRS) regulations, tax publications, and tax treatises.
Petitioner and Mrs. Roco correctly concluded that none of those
authorities discuss whether payments to a relator in a qui tam
case are includable in the relator’s gross income. Mrs. Roco
told petitioner that she thought the qui tam payment was probably
not includable in gross income.
After he received the Form 1099-MISC, petitioner requested a
private letter ruling from the IRS on July 23, 1997, as to the
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