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lose her job if she owed substantial tax for failing to report
the qui tam payment.
The IRS began the examination of petitioner’s 1997 income
tax return in 1999.
OPINION
A. Whether the $1,568,087 Qui Tam Payment Is Includable in
Income
We first decide whether the $1,568,087 payment made by the
United States to petitioner in the qui tam action is includable
in petitioner’s gross income.
The qui tam payment to petitioner was the equivalent of a
reward for petitioner’s efforts to obtain repayment to the United
States of overcharges by NYUMC. Rewards are generally includable
in gross income. Sec. 1.61-2(a), Income Tax Regs.
Petitioner contends that, if qui tam payments are includable
in gross income, taxpayers will be discouraged from bringing
actions under the FCA. We disagree that this possibility
justifies holding for petitioner. Petitioner’s point could also
be made with respect to taxing any reward, but rewards are
clearly includable in gross income under section 1.61-2(a)(1),
Income Tax Regs.
Petitioner contends that the $1,568,087 qui tam payment is
not includable in gross income because it is not gain derived
from capital or labor. See Eisner v. Macomber, 252 U.S. 189, 207
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