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BHC refused to pay to William Becker the $5 million
installment due April 1, 1992, because of its claim that William
Becker had materially breached the covenant not to compete. On
March 19, 1992, BHC filed a complaint against William Becker in
the United States District Court for the Southern District of
Florida alleging, among other things, breach of contract. On
April 13, 1992, William Becker filed a counterclaim for the
accelerated payment of amounts owed to him under the purchase
documents. On March 7, 1994, the Federal District Court found
the covenant not to compete to be valid but also found that there
was no material breach and held for William Becker on his
counterclaim. Becker Holding Corp. v. Becker, No. 92-14057-CIV-
JCP (S.D. Fla. 1994). BHC appealed the decision and, on March
27, 1996, the Court of Appeals for the Eleventh Circuit (Eleventh
Circuit) affirmed the District Court’s judgment in favor of
William Becker, reversing and remanding to adjust the damage
award for prejudgment interest. Becker Holding Corp. v. Becker,
78 F.3d 514 (11th Cir. 1996). On May 22, 1996, BHC paid
$27,200,784 to William Becker in satisfaction of the entire
judgment.
Mr. Lynch prepared William and Mary Ann Becker’s Federal
income tax return for 1991. Due to the litigation then pending
in the Federal District Court, in which BHC sought to recover the
$5 million paid to William Becker in 1991, William Becker wanted
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