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agreement, John David Markley (Mr. Markley), the sole shareholder
and president of seller, terminated his Jeep-Eagle franchise with
Chrysler Corp. (Chrysler) and granted petitioner a covenant not
to compete. Petitioner acquired the relinquished franchise from
Chrysler. The sole issue for decision is whether the fair market
value of the covenant not to compete (sometimes referred to as
the covenant) is $490,000, as petitioner contends, $125,000, as
respondent contends, or some other amount. All section
references are to the Internal Revenue Code in effect for the
years in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioner (sometimes
referred to as buyer) is a corporation whose home office and
principal place of business was in Oklahoma City, Oklahoma, at
the time it filed the petition in this case. Petitioner filed
Forms 1120, U.S. Corporation Income Tax Return, for the taxable
years 1990 and 19911 with the Internal Revenue Service Center,
Austin, Texas. Petitioner had a calender yearend.
Mr. Markley's Ability to Compete
Mr. Markley entered the automobile dealership business in
the mid-1960's. He purchased a Ford dealership in Yukon,
1 Unless otherwise indicated, all descriptions pertain to
the years in issue.
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