
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC186]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
      PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
 
Sec. 186. Recoveries of damages for antitrust violations, etc.


(a) Allowance of deduction

    If a compensatory amount which is included in gross income is 
received or accrued during the taxable year for a compensable injury, 
there shall be allowed as a deduction for the taxable year an amount 
equal to the lesser of--
        (1) the amount of such compensatory amount, or
        (2) the amount of the unrecovered losses sustained as a result 
    of such compensable injury.

(b) Compensable injury

    For purposes of this section, the term ``compensable injury'' 
means--
        (1) injuries sustained as a result of an infringement of a 
    patent issued by the United States,
        (2) injuries sustained as a result of a breach of contract or a 
    breach of fiduciary duty or relationship, or
        (3) injuries sustained in business, or to property, by reason of 
    any conduct forbidden in the antitrust laws for which a civil action 
    may be brought under section 4 of the Act entitled ``An Act to 
    supplement existing laws against unlawful restraints and monopolies, 
    and for other purposes'', approved October 15, 1914 (commonly known 
    as the Clayton Act).

(c) Compensatory amount

    For purposes of this section, the term ``compensatory amount'' means 
the amount received or accrued during the taxable year as damages as a 
result of an award in, or in settlement of, a civil action for recovery 
for a compensable injury, reduced by any amounts paid or incurred in the 
taxable year in securing such award or settlement.

(d) Unrecovered losses

                           (1) In general

        For purposes of this section, the amount of any unrecovered loss 
    sustained as a result of any compensable injury is--
            (A) the sum of the amount of the net operating losses (as 
        determined under section 172) for each taxable year in whole or 
        in part within the injury period, to the extent that such net 
        operating losses are attributable to such compensable injury, 
        reduced by
            (B) the sum of--
                (i) the amount of the net operating losses described in 
            subparagraph (A) which were allowed for any prior taxable 
            year as a deduction under section 172 as a net operating 
            loss carryback or carryover to such taxable year, and
                (ii) the amounts allowed as a deduction under subsection 
            (a) for any prior taxable year for prior recoveries of 
            compensatory amounts for such compensable injury.

                          (2) Injury period

        For purposes of paragraph (1), the injury period is--
            (A) with respect to any infringement of a patent, the period 
        in which such infringement occurred,
            (B) with respect to a breach of contract or breach of 
        fiduciary duty or relationship, the period during which amounts 
        would have been received or accrued but for the breach of 
        contract or breach of fiduciary duty or relationship, and
            (C) with respect to injuries sustained by reason of any 
        conduct forbidden in the antitrust laws, the period in which 
        such injuries were sustained.

        (3) Net operating losses attributable to compensable 
                                  injuries

        For purposes of paragraph (1)--
            (A) a net operating loss for any taxable year shall be 
        treated as attributable to a compensable injury to the extent of 
        the compensable injury sustained during such taxable year, and
            (B) if only a portion of a net operating loss for any 
        taxable year is attributable to a compensable injury, such 
        portion shall (in applying section 172 for purposes of this 
        section) be considered to be a separate net operating loss for 
        such year to be applied after the other portion of such net 
        operating loss.

(e) Effect on net operating loss carryovers

    If for the taxable year in which a compensatory amount is received 
or accrued any portion of a net operating loss carryover to such year is 
attributable to the compensable injury for which such amount is received 
or accrued, such portion of such net operating loss carryover shall be 
reduced by an amount equal to--
        (1) the deduction allowed under subsection (a) with respect to 
    such compensatory amount, reduced by
        (2) any portion of the unrecovered losses sustained as a result 
    of the compensable injury with respect to which the period for 
    carryover under section 172 has expired.

(Added Pub. L. 91-172, title IX, Sec. 904(a), Dec. 30, 1969, 83 Stat. 
711.)

                       References in Text

    The antitrust laws, referred to in subsecs. (b)(3), (d)(2)(C), are 
classified generally to section 1 et seq. of Title 15, Commerce and 
Trade.
    Section 4 of the Clayton Act, referred to in subsec. (b)(3), is 
classified to section 15 of Title 15.


                             Effective Date

    Section 904(c) of Pub. L. 91-172 provided that: ``The amendments 
made by this section [enacting this section] shall apply to taxable 
years beginning after December 31, 1968.''
