It included the following holdings: Raytheon built up business good will on a rectifier tube that it developed, patented, and licensed to manufacturers.

In its tax return, Raytheon chose to allocate $60,000 of the settlement to the value of the patents, thus claiming only this amount as income and excluding the remaining $350,000 as damages.

It did not immediately argue that any damage recovery for loss of good will is always taxable as income; rather, it protested that "[t]here exists no clear evidence of what the amount was paid for so that an accurate apportionment can be made."

First: Are damages for the destruction of business good will taxable income—or a return of capital, of which any recovery of basis is non-taxable?

Second: If the recovery is non-taxable, did the Tax Court err in holding that there was insufficient evidence to enable it to determine what part of the lump sum payment was properly allocable to the settlement?