# ORIGIF{At

lfn tlir 

# @nitt! $trtos 60urt 0f

# ftlors[ @laints 

# 6lLEp No l,r-2887 

### (Filed February 

## li.20l

## j)

UNITEDSTATES,



### lmes P. 

### Dulty and 

### BcalrizN. Dufy, pro re, 

### walnut Creek, 

### Calilbhia 

# C! D wascmd, Trial Attomey. ComFercial LitlSanon 

### Brdch, 

## Td Dilision. United Srares 

### Depanmenlol Juslicc, washinston, D.C

,for 

### defendml. With him on the 

### bnch 

### {ere 'l anara W. Ashford- Acring 

### ,\sGtanl Anomcy 

### Ce.eFl, Tax Dn ision. 

### md David

## I Pincus, 

### Chiei CounofFedenl 

### clains scclion, 

### u.iled States DeFanncnl of Justice. washingt. n. D

## c olcounselNas Mar) 

## M balc,

### Ashtanl 

### chiet Coun

### ofFcdcialclains Secrion,Unitcd Slales D.Fanment of Jusiic€.washi ngton, D

### c. FEB 

### 13 20j5



## l clain for 

### Flund of 

### incone 

### tlx p,id on procccds of a serdetoenr aeteenenli "orig,n 

### olthe clann" 

### docti.ci inapplicabilily of 

### exclusi.. 

### lion ldation 

## underlRc.$ 104(a)(2)ipr.cccdsldable

asordinary incoDe

### od nolcapital gains 

### JAMES T 

### AND 

### REATRIZ N. 

### DUIIFY,

OPI:{ION AND ORDDR



### Inthis rrx relundcasc, 

### plaintifs lanes P. and 

### Beatiz 

### N Duff)" 

### (collectirell,'1hc Du$yJ 

### l seek 

### aElundol$lr,049in inconc taxes allesedly

### olfpaid fot lax

### yelr 

### 200? 

### An. 

## Contl 

## ! l,EClNo.l In 

### detr 

### contlain! thc Duffys maintain 

### dar thc proceeds

# ofd agFemenr e.tercd by 

### Mr. DulTy 

### lo senle a

## cllifr he had made

### *€rcnot 

### kxablc

## lusuul to 26 

### U.SC.("lR.C.)SlOa(x)(2)bccausparnent\rasonaccountofMrDufys-.phtsicalinjurv 

## .r phlsicalsickne$

## ' Ad. 

## conpl.l 

## lls. ln

### tie altemarve. lhc 

### Dullys 

### lver lhar the Pocccds 

### s€E not laxable 

### !s

### odlndy incone, but rather were 

### ldablc as capital gains 

### Bemr lo restore impaired 

### goodwill. 

### An. Compl. 

### lF I 19, 

### 125. Pend,ns 

### beloE the coun isthc

### sovennentt notionlodisnNs foriailurclo stateaclainupon{hichrclief 

### canberrantedpuNmlloRule l2lb)(6)oflheRuldsolthc CounofFederal 

### ClainsCRCIC-). Mot. 

### bDnnissofLnil€d

### SraFs( 

### Dct'sMor. 

## ),ECFNo.7is?eHisTr'al8:1922(Jd 27,2015)' Forthere4ons

$ared. lhe coud 

### con'ens the

### sovcment's notion to disDiss 

### undo 

### RcFc I2(b){6) into a 

### nolion for 

### sunnaryjudsmenr undct RCaC 56

### ad concludes lhat lhc

### goveme'l is

## cn led1o judemenl as d 

### nrner of law on the 

### Duffys bx refund

### clsin
BACKGROUND 

### ln2004,Mr 

### Du& maintained a pnvare consulting 

### busines

## An Compl'"6 He 

### sorked wilh the Uniled 

### conmercial 

### Banl

## ("UcB or 

### 'the 

### Bok") in

## Sil Frdcisco, California. 

### Md thcn

### bame 

## Td Dircctor 

### dd Fnst Vice PBsident 

### oflhe 

### Bank

## //. While Norking al UCB, 

### Mr. 

### Duily was responsible lbr ensud.e lnat 3ll 

### accouring policies 

## sd pocedms witbin his depar.meni 

### conplied with tbe Public Conpany ccounlins 

### Refod 

### dd Inlestor 

### ltulection Act of2002 

### f'sdba;es oxley

## acf). Pub. 

## L lo7 204,116 stat. 

### ?45 An. 

## conpl

## f l?,Ex B2 To thar end, he "had rhe opporlunily 

## L obsene 

### liCB s

### conplimce 

### sith rdious lcgil, 

## ecomt.g, and 

## inecial procedures 

### dnd

. .panicipalcd in

## ndy sienincel decisions 

### anicling 

### UCBt ilndcial siaremenls

### An. 

## Contl !r 

### 17. In 2006, 

### Vr. Dury sihessed

## o clion al 

### Uclr thal 

### *3s allegedly fiaudulcnl and not in 

### conplihce silh lhe 

### Sarboes Oxlcy

## Act Am.

## Cohll

# ' 13. 

### llesubsequenrltreFodcdtheincidenlromanagemonlalUCB,includingthcChieflinacidl 

## oficd. tte 

## co;hiki.a6drhe SarbaneFoxley 

### Dnector. 

### Am conpl. !l'll 13_19,22.: 

### Mr'Dulav
sas 

### Dlced on 

### adminislalivc lcav€ shonly 

### lherealtei 

### n. Compl at Ex.

## D On 

### Novenber 9, 2006, UCB tem inated his onplo ymenl

## co.tact An.Conpl !170-7l,Ex.H
iFunher 

### ciblions lo the

## trssripl of the 

### hedne held on

### Jmus] 2?, 2015

## sill oDit a

rln the wake of the col lapse

. I Enron c orporation, Coneres s cnacled lhe Sdbanes Ox 

### lcl' 

## Act S??S. 

### Rep.No 

### l0? 146,at 

### I (2002). Ils purpose 

## is [l]o protect invcslots by 

### inploving $e acclracy 

### ed reliabilily of coryorare 

### discbsms nade 

### pusunt to thc sccurities 

### la\s

.

# . "

rMr. 

### Dufy was convinced thal a

## pdftdd 

## ld adjusiaent, suggesFd by Deloine Touche Tohnarsu 

### Liniled 

## ( D&

# f ),violared Generauy Accepted Accounlins 

### Pdnciples .tet -^m 

### Compl..ll22 

## 23 Alrhoueh 

### thh adjuslmenl 

## \ould hare incr.ascd cash 

### flow [al 

### UCBI

## dd Esulted in a 

### ldge ben€ill to lhc books," 

### An. Compl. 

### fl24,

# it was possibly 

### liaud," 

### r,e Am 

### Compl.jl48. Accordine to 

### Mr. Dufly, UCB 

### nmgeDenl nevenncbs booked the 

### D&T adju$nenl 

### incontaventionofde Sdbdes oxley 

### Act. J_ee

### Am Compl 

### ni 53,57_58

In 2008, UCD's p!rent company, UCBH Holdinss, 

### Inc ("UCBH"), rcceived 

### bushly $298 

### million in bailoul tunds

### fron lhc Uniled Sratos

## l usurj-''s Truubled Asscl 

### ReliefPnsFm 

## ('TARI") An. C.npl. ll 

### 96. Approxindely one 

### yee l.ler. lhe 

### Bdk collapscd 

### md

### wd taken
over by the Federal Deposil lnsurance 

### CoaoFlion 'se 

# n Compl.ll96, 

## Er

# K fhe pnmary 

### reasonforUCB'sliilue was inadeludrc 

### oversigh by lhe Roard

# ofDnedos od n&aecnenl



# . .

# . [V]anous 

### UcB offciah nisrepresenGd or 

### omired rclerant 

## l.d pcrform.nce data, 

### alleEd docunenG to 

### inprove tbe perception 

### ol lom quality. and 

### nlde othcr 

### nisEDEsenulions rhal 

### inpacled 

### UCBIh find.ial sbtcmenls." Am. 

### Conpl 

## attx 

# K UCBH
was rhe

### fi6i recipienr 

### oI I RP funds 10fail. 

### md 

### ldpaym los their entne $298 

### nillion invcsibe.t. Sge 

### Hr'g

### Tr.3l:lS lo 

### l2:17.A. J 

### R UI',

# vr DLlr) ri eo d

## cl.rm.gdni l o

### BaL

# on'D(d) 

# : ?0n- 

### tri 

### h he



## D.pdrenr' 

# l dl'o' d les ns 

### eml o) r

## c| dF.r mrnd'ron

## n'rola on

### oi l8 U S

### C 6\laral Am. CodDl. al Ex. 

### D. Mr. DuflY 

### nainuined that 

### "UCB rcminated his 

### edplovnenl bectusc 

### or his paniciFation in 

### m

## edlny protccled by the

### Sdbdcloxlev Act, 

### md thal UCB r€talialed aaainsl 

### hih lo punish 

### hin for his rcfusal 

## L paniciplte in the unelhical 

### md illesal cohduct

### of UC8." An. Conpl. 

### !16t. UCB filed

## d objection io

## M. 

## Dultt onplainr on or about 

### Ap.il 5, 

### 2007.

### An. ConDl. ar

## ux D.5 

### Following his depanuF

## froi ucB.Mr' 

## Dui! pusued olher cmployment opponmides 

### md altenpled 1oexpmd his

### cons tine praclice,

## vr.An Conpl lltl 73-74. bul was not successtul in lhese endeavos bccause "[potential 

### cmplove$

### ed clienls] rcquned a rcfeEnce 

### fiom UCBL,I 

### shich

### ws nol 

### po$iblc,"

## An Conpl 

## 'll 76_78 During 

### lhis 1ime, 

### Mr. 

### Dufy rcponedly suliered $rcss 

### md anxieq 

### lion thc 

### Sdbmes Oxlev 

### Elaliation 

## Hre 

## lr.21 8 

### 10,*hichallcsedly"afectshinevenloday,"An Compl.ll106.
A 

### ltw dsys bcaore an

### Adninistative Law Judse

### wd eheduled 10

## hw Mr 

## DDt\t cde against IJCB, 

### Mr. 

### Dully enlered into

### t'Serdemcnt Agreem€nl

### dd Ccneral Release 

### resollin3 all 

### clains acain$ the

# 8.nl Am 

## contl l80,Ex l 

### C'selllene.l 

## aetcneni )

# i The 

### setlcmenl 

### Asrenenr 

### wd

# i full

### dd complete 

### dan8enenl for lhe pemanent 

### leminalion of 

### lMr'l 

## Duttt\ employncnt iclalionship wirh 

### [UCB], ' Senlenent Asreemenl 

## ' 4, and specified that



### lUcB I has entered inlo this Agreencnl for the

### ercl,rn" ?,/p,r? 

# ,/ ar.i.1ihg 

### the.,p.rre an.l inconrehiehce 

### oJfulther 

## liti$nioh 

## lhis Agreencnl shall not be deened, aL

### myline or in any 

## lbrun,6

# d adnission by 

### mr penon or enlity releded by lhis AsEemenL 

## ol liabilitr to, 

### oi the

### validily of 

### my 

### dain, by 

### [Mr.l 

### Dufy.

aThc 

### rhistleblower Drovision 

### ol the 

### Sdbdcs-Oxley Acl, I 8 

### U

## s.c $ I 514(a), 

### vas eMded ro 

### conbal

### dd lhwan a

### colpodle 

### climate lhal discouEgelsl 

### enplotces 

### frcn reponine fraudulenr bchavior not only 10 the proper aurhorilics, such

## 6 ihe [Fedeial Bureau 

### of

Invesd gari onl 

### &d thc 

### lunned Slales Secuili es

### ed Exchmge Conm hsi onl
, bDt even 

### inrcmlly." S. Rep 

## No l0T- 1,16, at 5 

### (2002). Acconlingly, Scclion 15

## l4(r) lolects lwhGtleblowdsl 

### rhcn

## $el tatc 

### lavtul acs lo 

### disclos iniomalion or 

### othesise assisl

### cdmnd invcstisalors. federal 

### regulrlo^, 

### constc$, superyiso$ (or other proper people 

### vilnin a 

### corlonlion),orpaniesinajudicial procccd ing in delec ring

### dd sloppi ng ftaud 

## "

# /l al

# lr llan cmFloyer does 

### llke Ftaliatoiy aclion aeainsl lhe

### vhisdeblower, fs]ubsction (b)

### lotSalion ltl4lalloNslheeDployeelollleaconplaint$ithlheDepannenlof 

## Labor..



# . &

rThe complainl 

### *€s

### disnissd in May 2005 on iimeliness 

### grouds. lde

## Ph Reply

# btl toDettMot.tollismhs(Ph'Oppn)a14.ECFNol0Mi.Duilyobject.dlolhaldecision 

## ed sousht rcinstatemenl of his

### claim. See 

### n. Conpl. al Ex. 

### D. According to lho Dufl)"s. 

### 'lhis reinslalcn€nl issue 

### *€sresolred 

### in lavor

## of Mr. DulTyl ' and th€case asainst 

### UCR sas lhen 

### scheduledforahedngon 

### ihnerilsfortevievonoctabc4l Is.200?.' /.1
6Mr. 

### DDfy conrends thal 

### 'had [he] nor be.n under sucb unbedablc cmotional 

### disftss and be€n

### ol righr 

### nind lwhen 

### consideing seulencnl], md had he not had such poor legal ashtance, UCB 

### rould havc been found 

### suilty of 

### liaud." Am Conpl. fl 8 I

## ./l !13 

### (enphdn added). 

### LJnderthetemsolihcs€tdement,UCBagreedtopavatotalsumol

S?s.000. 

### \'irh $5o,0oo b,:ins 

### awsded to 

### Mr Duary 

### md $25,000 

### bcinapaid 

### o hn atumevs al ihe Popelka LaR 

### Crow, 

### .!.C. 1d

## jllll.l-1.2 ,\ccording ro lhc SenlenenL Agrcemenl 

## M! Duttv 

## ss to 

### innediatelt 

## { ithdra} all

### chihs againsl UCB 

### cudenllt Pending beforc the 

### Depslnenl ofl-abor, thus 

### allosing lhc Sccr€tary 

### ofLabor lo cnler a

### finalordcr dhmissing 

### thos clains 

### wilh 

### pEjudne 

# d I s. Mr. 

### Dully aho conscntcd 

### lo the 

### lbllowing stipulation:



### [UcB I

### md i1s counsel have madc no represenlarioru or 

### Rmudes con.cmins lhe tax 

### tredhent or characlerizarion 

### oflh€consideF 

### aion for lhis 

### AgFemenr LMr,lDulTy is solely Esponsible for any 

### Ll{ liabilities occasioned by 

### lUCBl s P.yment 

### ol Lhe

### o.sideration 

# I I 7. An

### AdDinislEtire Law Judge revicwed appruved thc 

### senlenent Asreemenl on

## oclobr tems 

### ofde agreemc.t to be fair and redonable 

### de iems ol lhc proposed 

### agdmenl md 21.200?. S?eDet s 

### Mol.

## atEx.6('l lind 

### $e 

### dd adequately 

### po&ct Mi. Dully.").
Thercaftft, lhc 

### Du$ys filed a 

### Fom 1040 

### (L.S. lndividual 

### lncone 'lax Relurn) for 200?, acknowledging rhc rcccipr of $50,000 

### iion a'lawsuit" md entedns thal 

### sun

## s 'olher 

### tdable incone." 

### Det s]''or 

### !t Ex 

## lt.] Ihc Dulrys aho included Schcdule 

### D (Capital 

### Clins 

## &d Lo$es) 

### witb lheir 

### incone

## ld retum, in 

### shich lhey repofted 

### long-t€m caPilal lo$es, bul no 

### capnalgains. 

## /d OnDecenberI,2008,rheDlifysrercissuedau!iefundinthemounlof 51,50OfromtheUS Depdment 

### oltbe Trersury,lnlemal RevaN€

## Sdicc 

## ( lRS")

## /latEx. 

## 7 The 

### Dufls Droceeded ro

### filc a

## forn 1040X (Anended 

### U S. 

### Individul Incone 

## Td Rclm) onApill5,20lirequestingarctundinthcmounlol$l3,049lobecEdnedo$cn2007tax liabihv. 

### /d atFx

# 9 Tho 

### mcndcd relum slaled 

### ihd the 

### inclusionof$50.000d incone

# i.lh.

rThe Duifys did not include the 325,000 paid

### o rhc Popelka LaR Croup on lhon 

### bx 

## €run. Deil s

### Mol 

## !tEx 

## 3 The

### sovcm.nt nai.tains that 

### "lllhe $2s,000 

### Nd pbperlyLdable

as 

### incone to lhe 

### Dufys as

### p,id ro

### thct anomcys for their

### benefir, 

# I/ al 5

# .5 Becaus the sralule 

### oflinitltions on a$essncnls 

### md collcclions 

### bd expned. rca 

### LR.C $

### 650l,nisnol nece$ary ror rhe coun to rcach adecision 

## $ to Nbe$er lhe 

### Duflys should have Fponed 

### $e $25,000aslaxable 

### incone, s?e

### Dct s

### Mot 

## atj n.5 (conceding

# $ thc Coverment 

## cmor .ou.ldclain for lh€utreponed setllenenl proceeds

## fsn 2007), J.g atuo Reply 

### Br' 

### oflhe United Slates in 

### Supponof

## i$Mol lo 

### Disiss ("Def 

## sRepll)ar I 

### n 

### l, 

## lCFNo 

## Il ("[T]he 

### aovemenl does nol seek rccovcry of taxcs Elated to the $25,000 ponion of that 

### mount lhat plaintiiTs dnecFd lo be paid ro rhcir altorncy as lesal fees 

### dd excludcd 

### frcm incone on

### $eir

In all elents. rhe 

### Duflvs conlcnd lhal lhe America Jobs 

### crcalion Acl of 2004, Pub. 

### L 

### No 108-357.til.VIIS?03(a),(b),Il8Sbt.I546,15,1?, afr€ndcd lhe 

### lntenal Rerenue Code
ro 

### allos a

### ldpa)€r 10 deducl 

### lion gross income anorney s fees 

### ed coun cosls paid by, 

### oi on 

### behallol lhe taxpayer in comection 

### wilh a

### clain o I unla$ tu| discrini nalion 

### orretaliation lbr a protectcd 

### aclility." 

### Ph. Opp n 

### !t 6

### Giliig LR.C. 062(eX20). 

## G)) lhe Duffys aver 

### thd

### $c claim bascd on 

### Strb&es-Oxley qas a 

### p(lesred 

### aclilny. /d2()O7 iax retum was incorrecl becausc lnat 

### mount 

### "wd nol 

### ldable 

## "

# /r' fhe Dufivs



### subsequeltlyliledasccondanendeddrelunonOctobr4i2011lotxplainl]Nhvlhis incone..tsdlnolsubjecttotaxor[could]bcofseragainstrhctaxpaverlsl caFital loss 

### car.] 

## tosard." Ph. Opp n al 

### rix.

# 2 ln a slalenenl atrached 10 the second anended 

## ttud,lhe Dufys nade the 

### iouosine declaratlon:



# /, Tbc IRS disauoRed the 

## Dufts rcqucst lor a refund on

### April12,1012, slating

### that ltlhc $50,000 non-employee com pen sari on 

### lron [r]CBlis h{able as

### origi.ally 6led 

## ' Dell\ Mol al 

### Ex. l0i Jdeabo Pls.' 

### Opp'r al 

### Ex 5-6.

Jusl shon of

### l*o ycm affer tbe nolice of

## diello{m€, on

## Ap l I 

### I,2014,lhc Dufiys nlcd sun in lhis coun, arguing rhal lhe IRS ctroneously denied

### $cn retund 

### clain. An mcnded cohplainr 

### w.s 

### filedonMay2,2014. ln the pleadinss. tbe 

## Duils presenled identical 

### dgmcnts lo thosc raned in the second 

### aiended

## td elm, i



## . .thal

### $e] de cntilled 10 

### reover a

## td rctud oa$11,049 because the selllemenl 

### taynentol$s0,000 was excludablc 

### fron stos income 

## udei LR.CSI04(a)(2),oraliernatively,$!slaxableascaFitalsainsforlostC.odwillConplatl;
ree abo

## An Conpl. al

# I \olably absent

### fron these Flcadines Nas any Eferencc to the 

### seond mcnded

## td retm or

## d acconp&yine altachnent 

### ofenher mcnded rrx 

### relum. On

### tuly 28, 20 14, the 

### govement responded 

### wi$ a molion ro disniss for lack

### ol subject 

### mallq

## juisdidioi pualant lo RCIiC l2(bX 

### l)

## dd ior 

### Itilue 

## b surc a

### clain upon which relief 

## cd be eranted 

### puruanl to 

### RcFc 

## l2(bx6) In opposition to ihe

## go!ffient's motio. lo 

### dhniss,lhe DulRs proffercd 

### nev 

### docmcns, includ ins the second adendcd 

### retur. ll led on Oclober 4, 20 I

# I s.? 

# th Opp 

### natEx 2. lnlishtoftheseextF pleading 

### nalcriah,lhe sovemnent 

### {iddrew lls 

### clain ior I& k o I subj ed nancr jurisdiction

## { Follos ing bricnnC and a heanng, the casc is 

### Eadv

Because of the 

### phtsical injury md physical 

### sickncs thal the 

### ldpaycr suffered as 

### !lesulr ol rhc conduct

## oilucBl, [r]he 

### settlcnc.t proceeds should be ercludcd 

### fron income 

### tdatlon 

## pusmt to 

### u.R.c. $l 104. In lhe 

### .lcmative. ibe seLll€ncnl proceeds should be lreated

## 6 capilal Cain 

### incone b4ause 

### oflhc injury 

### lo the 

### lupaycrs busincss Fpularion @d business 

### soodwill fhe decline in 

### ulue of lhe

## dpatels business repuanon 

## dd business 

### good*iu,

## d t result of ihe 

### elions of orh€rs.should be 

### tEatedasrhcdisposnionof acapital 

### asel.

sThc

### solcment's dsmenl uder RCFC l2(b)( I) 

### Ms predicaled on thc 

### 'subslmlial 

## vdiocerurc. Dct s Mo1. at 8 | seevamaaata

# I U,tedslar.r,1l,1Fed. 

## Cl I59,177(2014) (

### 'lundql rhe

### subsknial 

## vddce tule

. . a

### ldpaler is 

### bmcd 

### fron presenling 

### clains in a

### bx reiund suit rhar 

### sub$mri.lly rary ihe

## f&lul bdes 

### od legal rhcories thal 

### weE ser

### fonh in rhe tax rcfund 

### crain niEscnrcd to lhe 

### IRS. ) 

### (cilins 

### Ca,r,rr ,Sa/B
,

## I

# / v Unite.l Stdle!. 729 t:

### td 1:152, 

### 1367(fcd. 

## Ci 2011)iro.kheed 

### MarhnC.tP 

# I Lrirad Jrarsr, 2 l 0 F

## ld 1366.1371 (Fed 

### cn.2000)) Because the 

### DurTls' 

### liBt mended 

## ld r€tun

## s6 devoid of

### &y contenlion lhat rhe 

### scnkncnt proc@ds should be reared 

## a capnal Cains, 

### re. 

### Det s

### Mol. al 

## Er 9,1he 

### govement mainrained rhal ibe claim "musl be

### disiisscd asal substmlial 

### larioce with ftne 

## Du&J] dains 

## 6r €fund, ' 

### rd al

# I After rhe Dunys ptoscnted 1|e second 

### uendod hx rclum 

## rilh fien

### STANDARNS FOR 

### DECISIO]\ 

### A, Jurhdiction

The 

### TuckerAct,23 U.S.C. $ 1316(a)(l), srunts this 

### courljunsdiclion 1o consider tbdeml tax retund

## clains Shithr United 

### gat.s,19s fed. 

### Appx 

### 44.48(Fed.Cir 

## 2012)rrsrl"rlr unn..lStdtes,297 

## f 3a 

### t1J8,

### \382lled. 

### Cn 2002); 

### Mccahk 

### r. Uk'red Srarer, I05 Fed. 

### Cl.120, 122 (2012), 

### atfl,2A12 wL 6a39761 

### (Fed 

### Cn Nov. 27, 2012)r 

### r.? 

### aia LR.C $ 7122(e). (i). C) 

### te 

### lifling lo 

### $e concurenl 

### juhdiclion ol lhis 

### oout under lhe 

### Tucko ct and the 

### dislricl couns 

### undd 28 U,S.C, $ 

### l3a6(axl),lo @nsider suns for 

### |a\ 

### refundt. s apany seekin8 

### redre$ 

### in lhis coun, lhe taxpaler has rhe burden ofestablishing 

### rhaljuhdiclionexisls by a pEponderance 

### ofibeevidence,V.Ca,,, l05Fed Cl. 

### arl2z'see olso 

### Rocarichv 

## Lrrel&,reJ,93l a.2d99l, 

### 993(FcdCir 

## l99l) lo naintain a

### taxjefund suil in lhis coun, the 

### ldpayer nusl 

### nst pay the asse$ed tax in 

### iull, 

### l'?d/,/./, 297 

### F.ld at 1382,

### dd lile

## d administarive 

### clain lor atax 

### refmd 

### snh the IRS rhal complies 

### wilh all regulations, see LR.C. $

### 7422(a) [A] 

### rgulalion requircs the 

### eiund clain lo 

### 'delail each

### clained sround for a 

### Efund, and provide sutncicnl l.'cls 

### lo 

### appriserhelRSofirsbasis. Cdarlerv. 

### Unne.lStates, Fed

# Cl , ,2014wL69,12189.
ar 

### ;2 

### (rtd. 

### Cl Dec. 8, 201,f) (quariI.g Chicd4o 

### Mlvdukee Corp 

### r. i/,'/s./Srdr"r,40F.:rd37r, l7s (Icd. Cn.1994) 

### (i. rurn cirins Treas. 

### R.s. 

### { 1016402-2(b)(1))). 

### If the 

### lRSdoies 'he 

### .lain, rhe

### tdpaler nust Ccnerally

### nb sun in 

### $is coM wilhin 

## l}o yeus alier the denial, 

### ret LR C. 

## ! 6532(a)( 

### l), 

### lnd then 

### nay only Fise those 

### dgunm$ rhat

### sere 

### preliousl, sel fonh in the 

### adninistnrivc claih ro thc rRS. Lackhe.d 

### Manih,2r0l.1dar 

## lill:. see

### ako Ott@a Sihca Co 

# r Urite.lState!,699F.2A1124,ll:r8(Fed.Cn 1933)( Ioscthcr. 

### [.R.C $ 7a22(a)] 

### md [TEas. 

### Re8 $ 

### 101.64021(b)(l)l pFclude a

### taxpayeFphinliffron subslorialll varyinC al 

### lrial lhe 

## f&lul bdes 

### ofils dgumenls from those raised in the 

### Efund clains it presenled lo the 

### IRS.").

# lf these requnenents 

### !rc ner, the coun 

### nay adjudicale 

### $e rax retund 

### clain. 

## B, Corr€niotr

## of! Motion urder Rulc l2(b)i6) lo ()ne 

### ulder Ruls 12(d) 

### AnotionunderRCFCl2(b)(6)islddftscdonlhepleadin8s Aclaimforeliefsraredin rbepleadinesnusr"contlinsulncienttacrulialtci,rccepledaslrue,lo state a

### clain lo 

### reliel thal is plausible on its

## face r

### \h.roll

# \ r4bo1,556 

### \t.5. 662.678, (.2009) 

### lqwrine Bel

### Atl Corp

# I Tvanb\.550 U.5. 544, 570 

### (2007)). A claim is

### trcixlly plausible 

### lhen lbe 

### plaindn plcads facrual conrcnr rhat allows the coun ro draw the 

### esonable inf.rcncc lhal tbe 

### defenddl is liable lbr rhe

### ni{onducr allcecd. .ltDal,556US at678 (citing 

## l-o-6t,550 U.S al55?). Addirionally, the facts alleged 

### nusl 

### " phuiblr_ sugg6l[] (not mercly [be] consistent

### wirh) a showinc o I entitlemenr to reliet 

## " Catrr UnitedStote!,552F 3d 

### l37l,1176(Fed.Cir.2009) (quoing 

# L?,r& s50 

### L.S. 

### ats57). While lhe coDplainr "does not nccd detailed factual 

### lllegarions," 

## Iro,br, s50 

### U S. at 545, 

### it nusl pul

### foN&d nore

# the naked 

### Asnionlsl devoidol furiher factual 

### enlocement," .Iqrdl,556U.S. ar6?8 

### (cilins 

## lto,bt,550 U S. ar 55

### i) (alteiation in orieinal), or 

### 'the'defendml'unlawlully-h@ed-m+mcusationlsl," 

# tl (ciliiC

opposilion, rhe

### govemnonl conccdcd 

### lhatlhc goodwill/clpitll gains arcunent 

### *€snised

## ad considftd 

## lbyrhclRsl, Det s Reply 

### al2-i, and 

### wnhdie$ ils vdiance arsunenr 

### "lbr pu+oscs df

### $is nolion 

## b dnnns only," 

### rd al 

### lr ree 

### d/o Hr'g Tr. 3: 16-22

# Iydrt 550 

### L.S 

### al555) When 

### claluting a

### nolion ro disniss under RCFC 

### l2(b)(6) and

decidins wherher a claimed righl io 

### reli.f is

### plausiblrnol nerelt 

## po$ibl-de com nusl ''dras on irs

### judicial cxperience 

### md conmon sense."

### /d al

### 679. ln thal comeclion, lhe coun 

### ''mun 

### accepl4 

## tle

## fi. complainl's undisputed tacrDal allesations 

## od should 

### conshe 

## dm in a 

### tisht nost favorable 

### b lhc 

### plainl,tr." Canbti.lse 

# ' Irredsrakr,558 F3d 

### lll1.1335 (Fed. 

### Cif.2009) (cjting 

## Pq,rd, r,4l1ai,,,lt8 U 

### S.265,23r (1986)r Ooul.l, 

## In.

# ' LinitedStates,9l5 f_.2d 

### l2?1,l2?4(Ied. 

### Cn 

## l99l).
Iithc pdies pre*nr 

### nalle* oulside rhe pleadinss on a molion 

### lo 

### dhnns undqRCFC 12(b)(6), rhe coun has 

### dhcelion 10 consider lhose 

### nalcriah. tdstet 

# r UnitedSt.n.s.575F 

## ld 1ll2,r3:15(Fedcit.21At)GitineAu(CoastBa,ld'6rC,r,!t./cr,35sF.3d35,38_19 ( Isi

### Cn 200,1): 

### sc charles Alan 

### Wrisht 

### &

### Anhd R. 

### Millet, agd?/41 

### Ptoctie & Procedwe $ 

### l3?1,ar273 (3d cd.2004))ls€e 

### aho Fotbes

# I United States,a4 

### Fed

### Cl.319,l2l (2008), 

## d/A3lrFed Appx.s73(led.Ci..2009).' 

### uhenrhecounlakesc.sniaceofnancrnol encompssed b-v lhc Flcadinss, RCFC 

### l2(d) 

### Equies rh. 

### nolion to dismiss lo bc lrcaled 

## 6 one for 

### sunmdy judgnent Dndcr 

### RCIC 56. RCFC 

### l2(d);

## t., abo 

### ,9,,tinston Prcnatbhat 

### & s,ppu, 

## LLc\ Uait..ls!dl.!,t14Fed cl. 760, 76? 

### (2014) coiielalively, belb.e the coun 

### nav conven a 

### notion disniss inlo a

### nolion for 

### summry 

### iudgnen! thc panies 

### nust be put on noticc 

### olthecorve6ioninaccordwirh 

### RcrC l2(d). ,Valr,"

## v Unite.t 

### Slole!,96fed. C.\ 

### 627,629 

### (20rr)(cirins,,l&rur Unite.lStatet,s2tsed 

### ci.6t9.622(2008)). RcFC 

### l2(d)providesin

Itl on a 

### nolion und€r RCFC

## l2(bx6).
., nattcs oulslde lhe pleadinss

### dc Fescnlcn to

### dd nol excluded by lhe 

### courl.lhc motion 

### nusl bc

### tealcd as on€tor 

### sunnay judsnent undd 

## RcIc 56.

## AIraflis 

# nd be Ciwn u r.asanable 

### oppoaunil! to 

### Ptes.tu ull the 

### nateriul thdt

# i peflinehl to the motian
RCFC 

### r2(d)(emphashadded)isee 

### dlloBaathr UnnedStdt.s,990F.2d617,620Gcd Cn 1993)

## ( rhe notico 

### rquir€nenr

### ofRcFc 12(b) 

### hecodiied as

## Rcfc l2(d)l offss $e pancs a 

### tull opponuny 

### o Fcparc for and

## onply with the 

## Fqdeienh oa Rule 56.") (citins r_?/'/ 

## & Sons,Inc

# I Nna 

### Foal\|eq th.

, 705 

## I 2d 

### 1316.ll22 (Fed 

### cn. 

## l98l)) llowever,when

# its thc non-moving pany

## dll inmduces 

### cxta-tlcadins malter, thar

## prnl is

### dened lo be on constDcl 

### ilc .olice lhal the

## cou mlyconve rhe motion into a 

### nolion for 

### smnary judsment. ' 

## Errer,575r.rdarrrl5-361./GutatrItvineh.ure,|90l.1dJ7,4l(2dCt.1999)('The

cssenti al in,tuiry is Rh€therthe [non movant] should rcaso nably have Fcognized lhc po $ ibil 

### ity ihat lhe 

### norion 6ighl bc

### onvened into oDefor 

### sunhary judgnenl or

## sd tlken by 

### sD+rie md deprived of redonable 

### opp.dunity to

## m*l fach ouiside 

### $e plcadngs. ). 

### snotedintheEcitationofbackgoundf.cls.thecourthsreceivcddocumenlsfionlhe Duffys, including thc sccond 

### Mcnded 

## ld Elum. $hich 

### mplify 

## sd exlend the aueAa.ions conrained 

### inlhe plcadings 

### Se.Ph. Opp'natEx.2-6. ln 

### lxn. the 

### golennenl has relied


### 'lnsene6l, RCFC

## l2nino^ Fcd. R.

### Civ !.12,se?RCFC 12, Rules 

### Conntuee nore. 2002 

### telision, and 

### cses 

### lidn federal couds apFlyins Fed. 

### R.Civ. 

### P 12aEtypicallypesuasire in 

### thn coun. ree 

### P,/,1,r 

### ,v ,lJsocs 

## LP 

# I UktedStutet.tl4Fcd 

## Cl 7?1,780 

### n2 (2014).extcnsively on lhe 

### neslt provided 

### nateials fo. ns

### dBments. Jee Dcf

# \ Replv al 2 4



### Addnionally, the coun has 

### uren accounl 

### ol the added 

### e$ibits in construcling thc factual 

### b&keroud ol 

### lhn case and 

### cdnol accmlely address ihe

### d.iits witbout reson to lhcse 

### mateials. 

## SerHfaIr.9:21 

## l0:9 Thc

### coufs consideFlion ofthese 

### exlF pledding 

### sanes, ther€lorc, rcquires conve.sion 

### olthc gov.mmcnfs molion lo dhmGs inlo one lbr

## smarv judgDent under RCFC 

### 56. 

### rta RC)'C 12(d), conPale 

### Eae*,515 F.3d at

## lrl5 17 (acceprrns a 

### convcGionsnichhadb€endiscuscdvilhlheDanies). 

## trrTbatrUnitedStutet,96ledCl 288.299 (2010) (declinins ro conven 3

### nolionlo dismiss into asummary Judsmerl 

### toolon when 

### lhe cxhibih submitled by 

### de prnies clariry. rather 

### thd add 

### dyrhln8 neH to, lhe allesarions in

### thocomplai.t 

# ') ln rhis instance, thc coun save notice al lhc 

### hdin8 held on Januar,v

### 2t, 2Ol 5, that it nad rcceived documenls 

### lion rhc parties span 

### lron lhe pleadirys. and 

### asaEsult,the goremmenas 

## nolion [wa]s really

### tuning into a

## sumry j

### udgienl 

### nolion 

## Hra 

## lr.10:2I The 

### sovcmcnl concured 

### with ihe 

### conle6ion. Hf s

### Tr. l0:'1 9,

## od, subsequently, aarer

### $e hcding, the 

### Duf|ls subnitted a supplcncnlal post-beaing 

### bncf addressins factual 

### points 5!e 

### Ph. Noticc on Hearins for 

## Del\ Mol.lo 

## Disniss("th Po$ Hearing 

### Bi 

### "). DC F No 2

### 0. Consequently, the slfl

### clues of RCFC I2(d) lor 

### co.le6ion of ihe 

### soremmenf s

### norion lo 

### dhniss into one for suBmary

### judencnl hale been satislied.


## c. sunn.ryJudgD.nt
Summsl judgnont may be

### srdted $hen lhe pleadings, aJfrdavils, 

### lnd evidenliary 

### natcriah filed in a

### cas releal 

### lhat lhde is no genuine dispute

## s lo 

### my nalerial 

### f&t and lhe 

### novMl is cntilled 

### lojudgment 

## d a

### nater 

## oil!w." RCIC 56(a). A maleiial facl is one "that 

### nighraflcctthcoutconeoftbe suit under the 

### govening 

### law" ,tnderconI Libery 

### Lobbr,lnc, 477U.S.2,12,243{1936) A cenuine dispule is one that 

### "na, rc.sombly be 

### Fsolled in

### falot 

### of eitherplny 

## " ./l dl250. lhc novanl has lhe 

### buden ol demonslratinAlhe absence 

### ofsuch senuin€

### dnputes Accordinsly, 

### 'the inferences to b€

### dr,{n lron the 

### u.derlyins

## fach

.

### nusl be

### viesed in rhc lighr 

### nosr 

### faroFble to ibe pany opposine lhe 

### nolion.' Ma^r:hit. Etec 

## lhds CarZenithRadioCorll,4TSU.S.5?4.58?-88(1986)(quotinCLrtitedsratesr.Dieb.td,trc, 

## 369us 65,1,655(1962))rre?,leceloter(:ot11 

# | cdtrctt.471u.s.3l7,l2l(1986). Tbe 

### non-nordr 

### nal dclial sunmarr-judsDent by 

### coning 

## lntrdd rilh nate 

## !l laclsofils 

### o$u
more thm

## '[d]cr dcnials or 

### concluory 

### slalenenh. 

## indicati4 an evideDtiary 

### onuict crealed 

### .n rhc

## Eata" Bdmas 

## Bdtnt Mascknenlubrik AG

# I Mutdtd Md./l
,

## Zrl, 73 

### I |.2d 83 I , 836 

### (Fed 

### Cir. 198,r). The coun may

### gr&t suoh,ry judsnenl 

## '[*lhec &e rccord taken

## 6 a

### uhole 

### couldnolleadaraliomllieroflactlolindlbrthcnon'movingpany,,V,rJ,rlira.475USal 599 

### (,ltcration in original) (cilalions omilied).


### ANALYSIS 

# A Jurisdi.tion

This coun has

### lhejundical 

### posqlo adjudnat |ne

### Duliys 

### kx refud 

## clain The 

### Dutt]s paid rhe

### adoMt 

## .f asscssed tax 

### liabihy in

### full lor

## td ycd 200?, ree 

### De|s Mor' al

## lix 7. 

### md filed a

### ralid claito

## l'r a retund 

### with lhe IRS thal

### con|ncd suPporing evrdene nccessary 10 Frovc thar

### clain, ree 

## lls ' Opp'n al 

### Ex l-2. Alier the IRS denicd lhenrequest fo. arctund, rda 

## DeltMol.atDx lotssedlroPls'opFnalEx I,5-6,theDutfystinelyfileda|!xfttihdsuitin lhis coun, s.€

### Conpl 

## .t liJeez1so26U.S C. $

### 6512(a)(l). Thc 

### DufyJ conplaint docs not



### " substantially 

## vtry thc lcgal $eones 

### ed faclul bases sel 

### lbnb in lne

## ld rfund claid presented ro

### $e IRS.

## ' Z,ct eed 

### Mat1in.2lq F.1d

## ^ 

# lil l. Ralher, as the 

### sovemenl concedes, the arsumenh set

### fonb in lhc 

### conplaint qere raised in 

### $e second @enden

## ld relm md then werc considcrcn by 

### lhc 

### lRS. Dea's 

### Retly al 2

## li rrapars Pls.' Opp n at Ex. 2, wTr

## An Conpl 

# !i l19, 125, 

### 135 Gilen tbcso 

### cncumsloces, the 

### Dullis har€satislied rhe i un sd,cri onal 

### requnenenh for a

## rd rclund suit in 

### $is 

### coun ,Se?

# Lllrr 

# r U, eA

### Shtet. 5'1 Fed. 

### Ct 261,265 (2003) (holdinC rhal 

### pllintitlhad eslablished 

### subjectnatlerjuisdiction over a

## rd rcimd 

### clain Rhere 

### plainlill iully paid rhe income

## td oNcd, filed 

### aclain fora refund 

### wilh lhe IRS, 

### lnd limely filed a

### conplaint subsequent to thc noticc

## oldisllowdc).

1.

## tRC 

## ttaalolr. IR.C 6l(a)defines soss 

### incone 

## 6 "all incone 

### lion whatew source 

### derived." The broad sweep 

### oflhis prolision demonstnles th3l Consress 

### intended lo 

### uelhe full

## nc6rc of 

### ils 

## u!\ingpo{o. ,9 

### lreli,A 

# ! C/il6l4 r09 

### U.S 111. 

### i14 l\944)t see

### dko Cjnerg, Q)rp.

# I U"r€d,9rdt?s,55Fed 

### C|.489,512(2001). Cotrelarivelt, lhe Dudys, who 

### de 

### clainiry the tax 

### exenplion, have the burden of esrablisbing lhen enlnlcmcnt to a specific 

### exenption in the tax 

### c.de. 

### ,4br.han!!n

# I L/rred slz.dJ,223 F.3d 

### 1160.li62-61(Fed.Cir.2000)(cning 

## Ltrs./ s:fares

## r Jd,is,4l8 U 

### S.433.440-41l.l916ltalhe Bubble Roan, 

### Inc 

### L ar,r,1.rardJ. ls9

## f.rd 55r,561([cd. 

### Cn 1998)) 

## B,\unmar' Judcnetr.

Tne panies 

### rre ge.erally in lgreement 

### d lo the

### facrul underpinnings of lhe 

### c$e
N c

### ithd sidc com.srs the facr rhat 

### Mr D uffy entered inlo 

### $e S

### elllefrenl Agreenent 

### with lrCB on Ocrabci I

### Ii 200? They also agrce rbat 

### Mr. Duny *

## s paid 550,000

### dd his

## aDsel wN pro! ided $25 ,000 in co npensali on under lhe 

### lems of the Senl emeni

### Agreenenl. The panics dhaercc. 

### howclcr, as to thc

## ld lrealmenr 

### ofthe senlcnent award. Thc disFule 

### ftms on 

## (l) $helher$e purlose 

### ol lhe Seulement Asreement

## ws to conpensale 

### l'Ir. Dully lbr physical 

### inju.yorphysical sicknessimd (2) 

### ifthe setilenent proceeds received by 

### Mr. Duf|y were in consideralion for the dhposition or sale 

### oldmaEed 

### Eoodsill The second issue need only be 

### E.ched 

### ifthe nrsl 

### naner is 

### Esohed in lhc 

### govcmnc.i sfavor

The Duffys aver thal paymert ftom UCB has exeDpled 

### fron laxalion pu.suant ro I.R C. 

## ! I04(a)(2)b{ausn\€stheFsullof 'physicalinjuriesinnictedon [Mr. 

### DufIy s]physical 

### heallh." 

## Ph Opp n

### al 10. Allernalively, lhcy ar8ue lhal the 

### *tdenenl prcceds weE 

### tdable

# d capilal gains 

### mcml

## lo conpcnsalc 

### Mr. 

### Dulfy for dmages 

### innidcd upon his business 

### md pe$onal 

### goodull 

## " .Ve 

## Ph Om'n al 5;

### se ar? Hr'C

## T. 25:22 

### 24. ln rEsponsc.lhc 

### govendent 

### nakest$oargundnrs Fi4t, itconrends 

### thltthe n,ru€ofrhe 

### clai6lMr. 

### Dufyl liled,eain$ 

# [UCB] was,,r r.nacc.untofF*onalphrsical injudcs or sickncss. as requned by Lsubsecdonl 10,1(r)(2), but $?s

### sinply lo serde

## d enFloynenl discnmination 

## cl.in for 

### wonsful leminalion under28U.S C.A.

## { 1511[(a)]." 

### Det sReply at 

## I 2(emphasnin 

### original) Sccond, the govcrnmcnl 

### nainlains 

### $at thc scnlenent proceeds camot be

### trqted as capnal gains because parment Ras nol in consideradon for 

### $e sale or cxchmgc of 

### my capilal 

# aer IJd-'Tle.uL1. 1.J( .al oirle.rdg'rr' i'rhThe 

### Dufys argue lhal ihe pooeeds

## of$. Selllenenl 

### Agreen.nt

## aall lbir ibe

## tms or

I.R.C. S

### l0a(a)(2) lhal statute 

### Fovides, in 

### peninc.t pan:



### (a) ln

### gcnerdl. Dxcept in the 

### cde 

### ofmouns anributable to

## (dd nol in 

### cxccs

## ol deductiors allowed undcr

### scclion2ll (.ela!ng to 

### nedical. 

### elc, exp€nse, lbr 

### ant prior 

### taxable,€d, gross 

### in@ne.ioes 

### h.t incl*le (2) the 

### ona"nt 

### afa,y dandse! lother 

### th& 

### puitive damase, 

## r?.e'td (shelhr by suil ot asreemenl

## dd whelher 

### !s 

## lmp suns or as

### tetiodic paymenls)

# ,r ocotnt otpesohdl physi.al 

### injvies or

## Phfi.at :ic*nes.
t.RC. S I04(a) (emphasi s

### add€d).

## llc supicne Coun

## hs developed two ind€pendenl lesls thal

a raxpayer Dust Decr beaor. a

### s.tlcncnr mount 

### na) be excluded 

## lion go$ ncome under 

### Sarionl04(a)(2). 

### Co 

## m$ioner' Schteier,5t5r.S 123,317 (1995); see

## tkoGre.hr Co,,{r,o,r/,507 F.ld 851,867 

### (5ihCn.2007) 

# '' "Fns! thc 

### ldpayer nustdemonsmlc 

### $al lhe underl ying calse 

### ol action givins rise to the 

### recorer] i

### s baed upan 

### ton or 

### lon lype 

### ighlJr' and second, rhe 

### laxplycr 

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### ddases were Fceived "on accoml of penonal 

### lphysicallinjudesorlphlsicarjsickness".s.r/er?r.5l5U.S.allJ7t:eetledeeh,5AlF.3dar 867.Chonbenaike,rel 

### Chonbetloinr llnite,1Sl.les,4O1F.Jd 

## ll5,14l (5tnCn 2005) There is no 

### dnpde that tbe Seltlemenr Agreemem "satisfies the requi.emenl rhat thc 

### udedyng causeofxclionhalon.ii S?e 

### Dei sMol al

# l0 Tle salient queslion iswherhd thc 

### sctllenent parmenr 

### {2s rcccivcd "on account 

## of Mr. 

### Duflr's phtsical injuries or physical sickncss

The "on

### ecolnl of' 

### phec rcqutes a

### dteci causal 

### link between lhc dmages 

### md the physical injury or physical sicknessr in

### this.esFct, danases fmusl] be 

### rweded 

### br reson 

## ol or becausc of, a penonal physical 

### injury Ior physical 

### sicknBsl. Srdd,lt, 16? Fed

### Appx at 5911 

### r!S.r/.i.r md 

### Crs?, were decided usins the

## ld slllute in 

### ellecl beforc 1996. S.e, 

### ?.3, 

### CrEe,,507r 

### ldal867 n6 ( 'Because lhe pafiies ageed

.

# . lhal lhe 

### prel996law govemcd thc 

### tdabililyofrheselrlencnlpatnenlsalissuc,wewillapplyrhalv.^ion.") Priorlo 1996,IR C. $ 104(a)(2) had excluded 

## lion Cross 

### inconc 

### Mouns Eceived in conpcnsalion for i peNonal 

### injuies or 

### sjckness,'which included 

### physicalandnon physical 

### injui€ssuchasemotionll 

### disires.&el.R.C{10,1G)(2)(1995).trndcrlhel996amendhehs,moneyrecervedas conpcnetion nor alrributable lo 

### pe6onalphysical injury or physical sictness is

### nowldable.
See Sladryk 

# I C.nh\sianer,367 Fed.Appx. 586, 590 (6lh 

### Cn 201A\ 

### ke alto 

### Murlh! r' 

## lnte dlRerenreS.tr,49lr.ldl70,l?6(D.C.Cn.2007)'whilcrheexclusionhassincebeen nmo 

### scd, the hold ings 

### of these cases desclibe thc gc.era I appmach couns sho uld use

### in delcminins thc lax

### teatnenl oi dmages or 

### setrlmcnt proceeds

## udq [Section] 

### l01GX2) 

### md rcdain Sood 

### la$." &ptro:d 

### v Connilsi.net, 636 lt 3d 747 

### ,150 (5th 

### Cir' 201 I

# ) Accordingly,

ataxpa!€r 

### bclN $e budcn undd 

### Sation l04G)€),

## d mendcd. oaproving 

### pe^ondlPru/.al injufts or

# prlrl1 sicknss. &e 

### M,rpnt\,19i F 3d^r

# tA

t0se!

## ul!. Grc.t, 507 

### F.id ar 867 

### (thecounnu$ask'in 

## lieuolwhalqasthe. settlenent



## a*aded])ian1,r.o,./,..vLrn'edtdrsr,l10FedCl.650.662(2013)(lptltinglhe"inlieu of' re$). "Vhere damages 

### de rccciled 

### udcr a

### wtuen seltlenenl agEement, 

### lhe ibcus is

### o. $e origin and characteisiics 

### ol|ne clains serded in 

### deleminins wherher such damases 

## @ excludablc 

### mdd $ 

### r01G)(2). 

## ' G/es,,50? F.3d at367 (quolins 

### Piptoner U"ned 

### slates,laA 

### F.3d859,862(7ficn.1999)l.Tberefore,lhetdlrennenlofdanaseshingesonshelher Daynenl was nadc for 

## lie purpose of

### setlins a claim lor pesonal physical injury or physical sictness. 

## s.?a'fdel, United 

### States,2ll F.3d J22,

### t29 (6lh 

### Cn 2000). In considcrins this 

## _originolthcclain-docrine.raslelrC,,r'$-t,,/,l2lL3dl93(8thCn1997),r:.,inlieu ofsharwercdamagesasddorpaid,Delah.!rCannistioner,99Lld20,2324(quoling 

## Ale@nlerrthk.hdlRerS.rr.?2F.]d9i8,942(lstCn1995)(inLudquoli.gXa],,r.,, 

## ltod.CorprConnitliohet,r14F2dll0.lll(lslCn.1944))),lhecoulli6tlookslolhe express 

### ldsuage 

## i. rhe

### scnlcncnt for indicia 

### ofits 

## pu4oe Only i| "lhe setLlenenl a8rcenenl 

## lelc exprss 

### l@gugc ofpurpose, 

## [\'ill] lhe coun 

### lookll bcyond lhe aereenenl to olher evidence rhal may shed 

### lisht on the 

### 'inlent 

### oflhe plyor as lo the purpose in makng thc 

### payment." Crsg,, 507 

### F.rd al 86? (quoting 

## &,ctlst 

# r co,,nsio,ar,349F2d6l0,6ll (101h 

### cit.\965\teeahoPiptone-t30r_.ldat864inalrLI,t?ls?drer.25ClCi5l5-5'10(1992), 

## arf4 939 F.2d 1204 (Fed. 

## Cir.l99l)

The 

### Dullis p.sil lhal lhe seneral release langlagc 

### inlne Senlemenl 

### Agrccnenl is anb isuous

## d ro 

### $e pu+o scof rhe paynenl. and 

### lhet lbrc rhc co un should look pri naril v to the inlcnt 

### ofthe 

### parlies 

## Ph.'oppnal2. This 

### argment is

### mvailins because lhe 

### rems of the seltlenenl 

### agFenenl unequivocally iesolve 

### *hether $50,000 in 

### mnpensation $as 

### nadc on 

### ecounl or" 

### Mi. 

## Duliyt physical 

### injujes. tadgraPh 3of lhe

### set enen 

### ,\gEnent slales

## fial Nlr. 

### Dufy vas paid for 

### "lhc 

### er.l,Jile p,rpard of avoiding tnc cx!€nse

### md inconlcni€nce

### of ludhft lilisalion." Asreemenlll8 (cnphasis 

### added)r./ Oree,.507 F.1d at 868 (finding thal t&agraphs four 

### md six in a serll€menl

### ageencnl conlain 

### expE$ tdguaCe 

### ofpurpos) No 

### loguagc in lhe Seltlenent Agreenent suggests lhat the proceeds werc for lhe purlose of seltlihg

a claim for pbysical 

### injur) orphysicll siclness. 

### SeePipiro,e.l80F 

### ld at864 ( "Irre 

### hleltlenenl lalereenem 

### h a 

### ecncnl rclede 

### ofallclains 

### od malcs no specinc 

### rclerene to shelher lbe paynlenr 

### c.dpcnsatcd [rhe taxpayer] fo! pesonal injuncs or 

### sickrcss. ).

## cl abfthohet,?28 F.3d at 1:163

## ( Rarhf 

### lhanEoecli.san individualizedmoul foreachenploycebasedonthe unique 

### indiridual injunes 

### ofthat cnployee,lhe paynenls reflcctcd an

## anoul lssociat.d 

### sith rhe enployee's 

### $ork 

## rccod

# ) And lailure 

### io showlhe specific 

### @ount orthe paynenr 

### lllocable to thc 

### .lains of ton or 

### lonlike dmsges lot pcrsoml [physical] 

## injuic resulls in the 

### enfte 

## dounfs bcine presumed nol10 be excludablc 

# ' ,/ise

# r Corn'snJ,t, 7s T C

## M (CCH) 

## r5r4(Tc. r993)(ciring 

## laq'?,r Unite.t Stote!. 3s F 3d91, 96

## (21cn l994)r 

### c?rryr Connnlioher,91 LC. 160, 175 76

## (r988).,l1,h this ksue

### an.ltur.!okotho itsues,9r) 

## r2d 1486 (9th 

### Cir. 

### l99O)) Accodinsly, palmenl to 

### Mt. 

### Dufy was'conplctcly independenl

### of lheexisrcnce 

### orextenlolrnl pesonal [physical] 

## injuy. Scrlciet,515US.at330.

For rhc rcasons sated, the sun or350,000 paid to 

### Mr. 

### Duly pusuml io the Settlenent 

## Asrcdc.t does nol quali ry asercludablc gloss income 

### uder LR

# c $ 

### l04G)(2)

1l

### 2. 

### lrocee^ Jron th. sale

### ofsood\|ill. Busine$ 

### soodwill, a capilal 

### asst under t.R

# c $ 1221, 

### is lh€cxp4btion ofconlinued 

### parronagc. 

### raler

# r Cou-drD,,/.ll8L]d?89.793 (7lh 

### Cn.2003)iJea d&o Dsr 

### Mal,er 

### GasCor.Cit,olD6Moir6,238U.Sl53,165(1915)(fcood{illindicateslthatelenentoI valDc which inheFs in thc nxed 

### md iavotuble consideration 

### ofcuslomes. arising 

### trcm an enablishcd and 

### Fell-kno*n

### dd wcll'co.ducted busincss 

# ") Prcceeds 

### fron the sale 

### ofeoodNill

aresencrally 

### tdable as

### lapnd ga\ns. M"skat

# \ tinilel Stotes,554 F

## ld 

## l8l,l88 (lst 

### C;. 2aoq. 

### lee also 

### latternn

# I Cohhissianer,81l F 2,1562.569 (6lh 

### Cii. 1987)r 

### ct I R

## C $ 1222 

### (d.nnins a

### capilalelin 

### as gain 

### frcm the sale 

### orexchmge 

### ofacapnal

## sscl") Asalcis"a rdnsfer 

### ofpropeny for a lixed pncc in 

### noncy or its equivalcnl, " Schelble

# r Cohnksione\ IJA 

### F.id 1188, r194-95 

### (rOlt]Cn.1997)(q!r\neloedI McFatlan.l,l l0 U 

### S 

### 'ltl,4?8(1385), resllling

## frcn acomract 10 

### p6s rjghts of 

### propent for money, which thc buyer pa] sor 

### promisesr.payrotheseller[forthelhingboughtmdsold], r./ 

## l.Nori^eM iansonr Berry' 

### 49U.S.495.496(r850));sa?,6aConnittunetr 8rc||n,380V S.56r,571(1965) The salc 

### olsoodsill occus onlywhenthebusinessorapartofn,brhichlh€good*illaltehesis 

## ltd " s.rd1b1e,

### rl0 F 3d. at 

### 1l9l,tee alto Bak

## r,tl9F 3d 

### ar19l C

### Goodwill 

### caMolbe fansbtred lapanl frcm the 

### busines wnh trhich n 

### h cometed."): 

## cl Dure.

# I Unit.d 

### Stats, 

### 4,14F2d557,562(cl 

## Cl l9?l)(Asaleenlailinggoodwillresullsincapiblgaintotheseller

The 

### Dullls mainlain that 

### goodqill 

### exists with r€specl ro 

### [Mr 

## Dufy\l consulling 

### fim, ' 

### Ph 

### ' SuFrcply in Opposilion to 

### Defendbfs second Motion to 

### Dishiss 

### ("Pls. 

### Suieply )at6, 

## 14,EcrNo 16, 

### md lhal the 

### selLleiem 

### paFent 

### Ns in consideFlion tnr 

### dmase innicted on this 

### goodsill, Jee 

### rd al

# ll,2l. Because there sas no lax 

### bsis in this 

### goodwill.'lh€ Duilys contend lhar the pbcocds should be lrealed as

## aclpilll gain.

### /d 

## al24 The 

### sovennent docs nol dispule vhether 

### Mr. 

## Dul\ ow.cd a

### Cood 

### lla$el. 

## &?Del'sReplyall.'' Rather, the 

### aoverment argu€s lhat rhc 

### acrllcnenl 

### paync.r does not.epresenr a eaih from the disposnion 

### of mysoodwill. See i./. 

### al2 3. 

### IfthcDutisdidnolseuorexchangegoodwilli.considmlionlbr thc scrtlenent paynent, then 

### $e amoDtreceivcd by 

### Mr. Duffy is

## sablc as

### odinary incone. 

## ,v, s.lelble, 

## ll0 L3d at 1194 95; rec a6o 

## r,&r,lr8 F.3d 41794.

The 

### lcms ol lhc Senlenenl Agreemert do not evinm adhposnion or sale ot 

### bsncss 

### soodliu.rr Ralher, as discusscd 

### 9pla,lho paynenls 

## wet for'-lhc cxclusile puryose 

### ol'

LL I he fact thal 

### Mr. 

### Duffy s consulline 

### busines was underpe 

### omins, re, 

### Am Conpl
1l!l 73-?9, does not necessdily indicale 

## ! lack 

### oi goodwill, Je, D.seret 

### MEnt 

## O,P 

# I Uhited 

## tdrsr,I l2 

### rcd Cl 418,450 (2011) ("There is undeniably a posilive nexus berween thc 

### cxislcne 

## olsood ll and lhe 

### abilily to eereratc 

## prdfir but thal is 10 say 

### ncirhr th.t only proinablc 

### firns have 

### soodwill, no!, especiall), tnat only 

### irms with p.olits abolc lhe 

### nom

rrThe 

### rdninistialile conplaint filed againsr UCB, ree

### An. Conpl. at 

### Ex D,

### ed lhc 

### Duffy 

### s200?laxretum,se?Det'sMotatEx.8,sinildlldonotEferencethedisPositlonofmv goodrvill associatod 

### wilh acapital 6se1. 

## t)

### a!. idinA thc expe.se and 

### incorvenieNe of tunber l i ri

### gauoh. scltlemenl A8teement

## f 8, and



### Mr Duily 

### {as'solcly responsible for any lax 

### liabihies ocoaioncd by 

### {UCBI's pa}menl 

### ofthe considearion 

### loi thh 

### eEenenl; 

## idn1,.f Schelbler. 

### Conni:to,e/, 71 T.C.M. (CCH)

## ll66 (T.C 

### 1996),r,/4130F.ld1388(lothCir.1997)(holdingth extendcd 

### carnrgs 

### paynmts
sere not pnceeds 

### froD rhe sale 

### ofgoodwill sin.c 'thcre was no 

### eaptss sales 

### a8lccncnti nor 

## rdthere6v eridence 

### oflcndiblc busincss 

### ssets.')r 

### E/E/:ro,

# ' C."riJi,nel, 6,r 

### 'l.C.M. (CCII) 96:l (1992).

## dll? I F.3d

## l2rl (lsl Cn. 

### l99l) (finding tbal seltlehenr 

### Farhcds drd noi connifu1e a sale of capital 

### rssts because 

### $e 

### Fcmd tontainled] no exprcss 

### eles agmcncnl, nor 

### ldidl 

### nm.sincvidcnceofvendiblebusine$lssls. 

# ) As in S.re1DL 

## ddErrcrr,,, whalever 

## g.odiill or busincss rcpur!1ion 

### Mr. 

### Dufy had as

### r consulhl, hc rclained when he signed lbe 

### SctlcncntAcreemenr.Jea/aal.rrUnitedState:,454F2d1t20,1123(8thCir.l9?2), Mr. 

### Dully nay havc intended 1o treal the paynenl o

### l $ 50.0 00 as

### conpensatior bded 

### on the danase 

### inllicred on his lconsDlringl busincss, 

## Ph Surreply al21, 

## bul oncc havDg accepted rhc 

### lsdtlcn€ntAsEement] in ils 

### lbm, he 

### 'nu$ eceFl tbc

## ld consequences ol his choicci 

### *helher contcnDlalcd of

## no1,

.

### od nay not enjoy the 

### b.ncil of some other rcule he 

### night 

### hdrechoscnrofollowbuldidno1,,S.relDle,1:10F.rdarlr95(quotinsConDNr,e/r Nution.l 

## )fdfa D.bdratiry & 

## ,Urrts C,., 4l 7 

### l,I.s. 134, 149 (

### l9?4) Gnadons 

### onittcd))i

## ve aA, 

## Det\ Mor. at

## !x. l0 (cnins 

### Rev Rul.7,1-251, 1974-l 

### C.B.2l4 (19?4)) 

### Ir sum, lhe co nsidedLion 

### plid by UCB to 

### aloid litisstins Mr. 

## Duill\ enploynenld$criminatian md rctaliation 

### clains does no! rcDresenr gain

### fton lhe sale orexch@Cc 

### of soodwi IIdsoci atedwith a capnal 

### asset The settlement prococds, 

### lherefore 

### nay 

### nolbeta\eds

CONCLUSION

The 

### sovemenas moion lo dismhs 

### uidd RCIC 12(b)(6) 

### n convened into on€

### tdr sunnary 

### judencnt 

### mdd RCFC 

### 56. There 

### de no genuinc hsues

### ofnateial 

## litl in lhis case Rhich pFclude 

### sunndr) judgmcnl, and thc 

### golerment's molioh tor

## sm.ry judsnent is 

### CILA\TED. The sov€nmenr 

### is.ntillcd tojudsmenl on the 

## Dullis 

## rd rctund 

### claim The clcrk shall enter

### judgnenl in accoid 

### with rhis 

### dhposilion.

It is so 

### ORDERED



# ll