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Compensatory Damages Can Be Tax Deductible

A 2010 court decision that favored the IRS over a corporate taxpayer provides useful insights for other companies making restitution payments to the government.
On January 18, 2000, Fresenius Medical Care Holdings Inc. and the United States signed a “Global Agreement” resolving a series of suits against the company on claims of Medicare fraud. The agreement required Fresenius to pay the astonishing sum of $486,334,232 to the United States — $101,186,898 under the criminal agreements and $385,147,334 under the civil agreements. The civil agreements provided that “nothing in this Agreement constitutes an agreement by the United States concerning the characterization of the amounts paid…(for tax purposes).”

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