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rather, they are punitive in nature. O’Gilvie v. United States,
519 U.S. 79, 84 (1996) (citing Commissioner v. Schleier, 515 U.S.
323 (1995)). In the whistleblower trial, petitioner asked for
punitive damages “to send a message to this agency, to all of
state government that they ought not treat their loyal employees
the way Mr. Green was treated”.
Interest received is included in gross income because it
compensates for the delay in the receipt of a principal amount
(i.e., the final judgment). See Kieselbach v. Commissioner, 317
U.S. 399, 404 (1943); see also Robinson v. Commissioner, 102 T.C.
at 126; Kovacs v. Commissioner, 100 T.C. 124, 129 (1993), affd.
per curiam 25 F.3d 1048 (6th Cir. 1994); Aames v. Commissioner,
94 T.C. 189, 193 (1990). Though petitioner contends that “there
was no ‘indebtedness’” upon which the interest could accrue and
that respondent may not “convert a portion of the Settlement
Consideration to interest”, there is an express allocation for
prejudgment and postjudgment interest set out in paragraph 6 of
the settlement agreement.
Additionally, according to Potter, the settlement agreement
was worded “to try to minimize the state’s exposure to punitive
damages * * * [and pay] as little as possible in punitive
damages”. As set out in paragraph 1 quoted in our findings, the
State entered into the settlement agreement on the express
condition that it “receive a substantial abatement” of the
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