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A deduction for treble damages paid for breach of the taxpayer's National Health Service Corps medical service obligation was erroneously denied under IRC 265(a)(1) in 'Stroud v. US', 906 F. Supp. 990 (1995). The provision does not apply because taxpayer's damages were not a cost of earning a tax-exempt scholarship which had been received many years earlier, but rather a deductible cost of buying out one employment obligation in order to earn taxable income in another. The history of IRC 265(a)(1) is analyzed and criticized. In 'Keane v. CIR', 75 TCM 2046 (1998), the taxpayer's deduction for current interest on a note for damages for breach of an NHSC scholarship contract was erroneously denied (as in Stroud as well). The note was not for a student loan, as the court stated, but for deductible damages as in Stroud. The origin of the government's claim for damages was not the scholarship awarded in the remote past, but rather the more proximate breach of the scholarship contract. The origin of the claim doctrine is analyzed as it applies to two possible origins in the past. Also, both courts are criticized for overlooking the only relevant issue as to deductibility of the interest, namely, whether the physicians were employees or self-employed. The rule that employee business interest is personal and nondeductible is analyzed and criticized.