- Court: 9th Circuit Court of Appeals Archives
- Area(s) of Law: Tax Law
- Date Filed: 07-18-2012
- Case #: 10-56007
- Judge(s)/Court Below: Circuit Judge W. Fletcher for the Court; Circuit Judge Reinhardt and District Judge Zouhary
- Full Text Opinion
James Alderson filed a qui tam action under the False Claims Act against Quorum Health Group for Medicare fraud. Alderson spent five years compiling reports and providing information to the United States in order to convince the government to intervene. The government eventually settled the case for $631 million and Alderson received a 16% relator’s share. On his taxes, Alderson reported the relator’s share as ordinary income. He later amended his return, reporting the relator’s share as capital gains, thus entitling him to a substantial refund. Under 26 U.S.C. § 1222(1), (3), a capital gain is a “gain from the sale or exchange of a capital asset." A capital asset is property held by the taxpayer. Alderson’s relator’s share was not a capital gain because he did not sell or exchange any information to the government, he merely compiled reports and provided information to the government in order to pursue the qui tam suit and convince the government to intervene. To have a capital asset, the information provided by Alderson would have had to be his property, which was not the case because others knew the information and Alderson could not prevent anyone from disclosing the information to others. AFFIRMED.