Opinion ID: 198101
Heading Depth: 2
Heading Rank: 2

Heading: The DiBiasios.

Text: 8 Floriano DiBiasio underwent surgery in 1982, but the operation did not go well. He sued the surgeon for malpractice in a Rhode Island state court and a jury awarded him $700,000 in damages. The trial court entered a final (but reviewable) judgment for $1,272,810, which included $572,810 in prejudgment interest mandated by R.I. Gen. Laws § 9-21-10. During the appeal period, the parties settled the case for $1,000,000 and filed a stipulation with the court nearly identical to that filed in the Rozpad case. There was no discussion of, nor reference to, tax consequences. After payment of attorneys' fees and costs, Mr. DiBiasio netted $552,539.79. The DiBiasios did not report any part of the settlement on their 1989 federal income tax return. 9 On February 23, 1994, the Commissioner issued a notice of deficiency, asserting that a portion of the settlement constituted taxable prejudgment interest which should have been (but was not) reported in the year 1989. 10