---
kind: "section"
citation: "26 U.S.C. § 186"
title: "26"
title_heading: "Internal Revenue Code"
number: "186"
heading: "Recoveries of damages for antitrust violations, etc."
release: "119-102"
url: "https://uscodex.org/usc/26/186"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter B — Computation of Taxable Income"
  - "Part VI — Itemized Deductions for Individuals and Corporations"
---

# §186. Recoveries of damages for antitrust violations, etc.

- (a) **Allowance of deduction—** If a [compensatory amount](#c) which is included in gross income is received or accrued during the [taxable year](/usc/26/441.md?p=b) for a [compensable injury](#b), there shall be allowed as a deduction for the [taxable year](/usc/26/441.md?p=b) an amount equal to the lesser of—
  - (1) the amount of such [compensatory amount](#c), or
  - (2) the amount of the unrecovered losses sustained as a result of such [compensable injury](#b).
- (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](/usc/26/638.md?p=1),
  - (2) injuries sustained as a result of a breach of contract or a breach of [fiduciary](/usc/26/7701.md?p=a-6) duty or relationship, or
  - (3) injuries sustained in business, or to [property](/usc/26/614.md?p=a), 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](/usc/26/441.md?p=b) as damages as a result of an award in, or in settlement of, a civil action for recovery for a [compensable injury](#b), reduced by any amounts [paid or incurred](/usc/26/7701.md?p=a-25) in the [taxable year](/usc/26/441.md?p=b) 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](#b) is—
    - (A) the sum of the amount of the net operating losses (as determined under [section 172](/usc/26/172.md)) for each [taxable year](/usc/26/441.md?p=b) in whole or in part within the injury period, to the extent that such net operating losses are attributable to such [compensable injury](#b), reduced by
    - (B) the sum of—
      - (i) the amount of the net operating losses described in [subparagraph (A)](#d-1-A) which were allowed for any prior [taxable year](/usc/26/441.md?p=b) as a deduction under [section 172](/usc/26/172.md) as a net operating loss carryback or carryover to such [taxable year](/usc/26/441.md?p=b), and
      - (ii) the amounts allowed as a deduction under [subsection (a)](#a) for any prior [taxable year](/usc/26/441.md?p=b) for prior recoveries of [compensatory amounts](#c) for such [compensable injury](#b).
  - (2) **Injury period—** For purposes of [paragraph (1)](#d-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](/usc/26/7701.md?p=a-6) duty or relationship, the period during which amounts would have been received or accrued but for the breach of contract or breach of [fiduciary](/usc/26/7701.md?p=a-6) 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)](#d-1)—
    - (A) a net operating loss for any [taxable year](/usc/26/441.md?p=b) shall be treated as attributable to a [compensable injury](#b) to the extent of the [compensable injury](#b) sustained during such [taxable year](/usc/26/441.md?p=b), and
    - (B) if only a portion of a net operating loss for any [taxable year](/usc/26/441.md?p=b) is attributable to a [compensable injury](#b), such portion shall (in applying [section 172](/usc/26/172.md) 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](/usc/26/441.md?p=b) in which a [compensatory amount](#c) is received or accrued any portion of a net operating loss carryover to such year is attributable to the [compensable injury](#b) 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)](#a) with respect to such [compensatory amount](#c), reduced by
  - (2) any portion of the unrecovered losses sustained as a result of the [compensable injury](#b) with respect to which the period for carryover under [section 172](/usc/26/172.md) has expired.

## Source credit

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

## Notes

### Editorial Notes

### References in Text

Section 4 of the Clayton Act, referred to in subsec. (b)(3), is classified to section 15 of Title 15.

### Statutory Notes and Related Subsidiaries

### Effective Date

Pub. L. 91–172, title IX, § 904(c), Dec. 30, 1969, 83 Stat. 712, provided that: “The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 1968.”