In June 2012 a patient(John) came to him with an ingrown toenail. Quack performed a surgery to remove the toenail and, as a result of gross negligence, he removed the entire toe. John sued Quack for malpractice and settled out of court for $100,000. While Quack has malpractice insurance, he was afraid that his rates would go up if he submitted a claim, so Quack paid John the $100,000 out of his own funds and never submitted a claim to his insurer.

Quack is seeking your advice on deductibility of the $100,000.

Write Dr. Quack a letter discussing this problem. Your letter should be between two and five typed double space pages.

You will be graded primarily on your analysis and use of legal sources. Cite Revenue Rulings, Regulations, cases, and whatever other pertinent tax sources you can find. Sources should be noted in the paper with footnotes at the bottom of each page. You should use the online CCH and RIA through the Pollack Library system. Your only cover for the assignment should be a sheet of paper with your name, the date, and the title of the assignment and that should be stapled to the body of the paper.