A whistle-blower’s award is taxed as ordinary income, the Tax Court decides
in the case of a man who received over $6.5 million for informing the feds about his employer’s fraud.
He claimed he sold the information to the government in exchange for a share of any recovery, so the award should be taxed as capital gain. But the Court disagreed and nixed the favorable tax treatment (Patrick, 142 TC No. 5).