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July 20, 2012

20 July 2012

Is A Relator’s Bounty Taxable As Capital Gains or Ordinary Income?

In what it characterized as an issue of first impression, the Ninth Circuit recently held that the relator’s share of a recovery under the FCA is taxable as ordinary income, rather than at lower capital gains rates. A copy of the decision in Alderson v. United States, No. 10-56007 (9th Circuit, July 18, 2012) can be found here. Although the Court’s ruling most directly affects relators, the taxability of the relator’s share is a factor that any relator considers in the settlement calculus, and is therefore an issue of interest to the defense bar as well.

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