[thaumasiotes]

I'd like to hear more about this. Imagine that I, a sole proprietor, take in $10 million in a year, with deductible expenses of $1 million (if the numbers are rosy, well, it's my scenario ;) ). Imagine that I get hit with a fine of $8.5 million. How am I supposed to pay taxes on my $9 million of income with my $500K cash? Taxes get paid quarterly, so imagine I've already paid them when I get hit with the fine. Will the fine be discharged in my inevitable bankruptcy? Do the courts have to stand in line with my other creditors?

[tedunangst]

I don't think the fine would apply instantaneously. Also, the money you give back (the not punitive part) is clearly not income, so why would you pay taxes on it?

More like you have to return 6 million you didn't earn. Your profits are now 3 million. You owe taxes on 3 million, and the remaining 2.5 million fine comes out of what's left.

[thaumasiotes]

If I owe taxes on $3 million, and I also owe a $2.5 million dollar fine, then I owe a lot more than $3 million total. The fine can't "come out of what's left"; it's bigger than the amount that's left.