Raytheon Production Corp. v. Commissioner, 144 F.2d 110 (1st Cir. 1944), cert. denied, is a United States income tax case that discusses the tax deductibility of damages for loss of business good will. It included the following holdings: Under the tax code, business good will is not the present value of future profits, but present capital. Thus, damages for the destruction of goodwill (awarded under the Federal Antitrust Laws) are compensating for the destruction of a capital asset -- they are a "return" of this capital. It is settled law that, while a recovery (as court-ordered damages) of future profits is taxable, a recovery (as damages) of present capital is not. However, it is also settled law that compensatory damages are not tax-exempt just because they are a return of capital. Exemption applies only to the portion of these damages that recovers the cost basis of that capital; any excess damages serve to realize prior appreciation, and should be taxed as income. In this case, the basis is treated as zero because Raytheon is unable to establish it. (Generally, goodwill has a basis of zero because the costs that generate it are themselves immediately deductible (as expenses for advertising, PR, etc). However, goodwill can acquire a basis, e.g. as a portion of the cost of purchasing another business.) Facts Raytheon built up business good will on a rectifier tube that it developed, patented, and licensed to manufacturers. RCA licensed a competing tube to many of the same manufacturers, with a clause requiring the licensee to only buy from RCA. These antitrust practices caused a significant decline in Raytheon’s market share, eventually leading to the complete destruction of Raytheon’s business good will in this product market. RCA paid $410,000 to settle Raytheon's claims under the Federal Antitrust Laws, but in the same transaction also acquired rights to some 30 patents, and declined to state how much of its payment should be allocated between the patent license rights versus the settlement of the suit. 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. The Commissioner determined that the $350,000 constituted income. 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