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Biotech / Medical : VD's Model Portfolio & Discussion Thread -- Ignore unavailable to you. Want to Upgrade?

To: Rocketman who wrote (6448)	2/10/1999 1:59:00 PM
From: RCMac	Respond to of 9719

Hi, Rman, >>is [GSII's] patent award taxable???<< The short answer <g> is: It depends. The tax rules are something like this. To the extent that the award represents replacement of lost gains and profits, it would be taxable income. To the extent that the award represents compensation for "injury to capital structure and good will," there is an argument that it should be treated as a nontaxable return of capital. (There is an analogy to personal injury litigation awards: amounts for permanent bodily injury, etc. are nontaxable, whereas amounts representing lost wages and the like would be taxable. The tax accountant gets to argue how much to include in each category.) The increased damages over the $13M actual damages would likely be taxable ordinary income (like antitrust treble damages). I don't know enough about the company or the litigation to be able to guess how to apply the rules to this case. These rules may not matter much: if GSII has a significant net operating loss (NOL) carryforward, it will offset taxable gains with the NOL and owe no tax. Hope this helps. -- RCM