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Bachman, and Oralco refused to designate any portion of the $12
million settlement specifically for any unfiled alleged personal
injury claims of libel and slander. Instead, even the
Implementing Agreement designated the $12 million as payment for
all direct claims including any libel and slander. This general
language does not allocate any amount to personal injury claims.
Pursuant to the settlement, payments were made on August 18,
1995, to Mr. Poole $13,229,808, Mr. Siebert $4,410,060, Mr. Hall
$1,200,072, and Precision $1,274,100 in exchange for their shares
of stock in Ormet. Petitioner personally received $9,485,960
plus the $27 million paid to Signal and the $3,400,000 paid to
Costar for a grand total of $39,885,960 in exchange for his Ormet
shares plus $12 million for his direct claims.
Petitioners also received $4 million as a reimbursement for
petitioner’s legal fees and expenses related to the Six Lawsuits.
Petitioners had deducted or would have deducted these reimbursed
legal fees and expenses as business expenses on their 1995
Schedule C, Profit or Loss From Business. The parties have
stipulated that “None of the aforesaid legal fees or expenses
were allocated to any of petitioner’s claims against Oralco,
Ormet Corporation and/or Boyle for libel, slander and/or
defamation.” Nevertheless, petitioners excluded the $12 million
Ormet payment from their gross income on their 1995 return on the
basis of section 104(a)(2).
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