Patrick v. Commissioner

WILLIAMS, Circuit Judge.

This case concerns the proper tax treatment of nearly $7 million that the government paid Craig Patrick for uncovering a Medicaid fraud scheme where the government paid in excess of $75 million in phony billings. Patrick and an associate filed a qui tam suit under the False Claims Act against Kyphon, Inc. alleging that the company induced hospitals to file claims for Medicare reimbursement “for unnecessary inpatient hospital stays.” The United States intervened and settled the case. For his role in initiating the suit Patrick received a’s share of the government’s…