> You may be confused, but a business loss deduction usually reduces a taxable income.

Yes, I know, which is why in option B the taxes required was $9M instead of $10M. The 10k payment reduced taxable income from $100M to $90M. Business taxes are notoriously complex, but I am aware of no IRS rules that would allow a 10M legal settlement to reduce the taxes owed by >= $10M. If you believe I remain confused, please by all means provide an example scenario and/or citations to the relevant tax statutes.