Opinion ID: 212039
Heading Depth: 4
Heading Rank: 4

Heading: Tax Gross-up

Text: 53 Fourth, the government challenges the trial court's action in grossing up the damages award to account for taxes. According to the government, Ahmanson is unlikely to pay taxes on this award given its ability to draw on tax planning resources. Moreover, the government says, future tax rates are unknown, so adjusting damages based on projected rates of taxation is speculative. 54 The plaintiffs defend the tax adjustment to the award. Because the damages must reflect after-tax harm, the plaintiffs say, Ahmanson would not be made whole without a tax gross-up. The plaintiffs also characterize uncertainty over future tax rates as minor and argue that such concerns should not preclude recovery because the burden of imprecision falls on the breaching party, the government. 55 The Court Federal of Claims properly adjusted the damages award to reflect tax consequences. The parties cite no Federal Circuit authority that deals specifically with this issue, and we have found none. We adopt the rule of other courts that a tax gross-up is appropriate when a taxable award compensates a plaintiff for lost monies that would not have been taxable. See Oddi v. Ayco Corp., 947 F.2d 257, 267 (7th Cir.1991); First Nationwide Bank v. United States, 56 Fed. Cl. 438, 449 (2003); see also LaSalle Talman Bank, F.S.B. v. United States, 45 Fed. Cl. 64, 110 (1999), aff'd in part and vacated in part, 317 F.3d 1363 (Fed.Cir.2003) (acknowledging the possibility of adjusting an award for tax purposes but finding plaintiff's tax figures too speculative on the particular facts of the case). The Court of Federal Claims found that Ahmanson's award compensated it for lost monies that would not have been taxable. The court further determined that the award would be taxed as gross income of Washington Mutual, the current parent company of Home and Ahmanson. Home III, 57 Fed. Cl. at 730-31. These conclusions are not clearly erroneous. In view of the expert testimony offered at trial, the court also did not clearly err in determining the rate at which Washington Mutual would pay taxes on the award. See id. at 730-31. We therefore affirm the court's tax gross-up of the award. 56