U.S. Internal Revenue Service in Washington, D.C. Photo: Mike Scarcella/ALM Should Disgorgement in Securities Cases Be Considered Tax-Deductible 'Restitution'?
The IRS views disgorgement as a penalty, and thus not deductible as restitution, but the Supreme Court recently issued a decision in "Liu v. SEC" undercutting the IRS's rationale. In light of "Liu," the IRS needs to rethink its rationale.
November 16, 2020 at 05:24 PM
6 minute read
A subtle but interesting issue for white-collar lawyers is the tax treatment of settlement payments to resolve government investigations. Proposed regulations would treat the disgorgement of profits as nondeductible. Recent Supreme Court guidance, however, makes the IRS's position susceptible to challenge. And new documentation and IRS reporting requirements will require settling agencies to engage on these tax issues.
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