Emmanuel L. Roco - Page 7

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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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