John H. Miner and Holly K. Miner - Page 15




                                       - 15 -                                         
          Less stock is equal to its par value, or that the fair market               
          value of Jasiak's Cost Less stock is $10,000 here.                          
               We conclude that there is no credible evidence that Jasiak's           
          oral promise not to compete had any value.                                  
                    c.   Whether To Estimate an Amount To Allocate to                 
                         Jasiak's Promise Not To Compete                              
               Petitioners contend that we should apply the Cohan rule                
          (enunciated in Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d              
          Cir. 1930)), to estimate an amount for Jasiak's promise not to              
          compete if we decide that Cost Less may not amortize $165,000.              
          We disagree.  We may estimate an amount under Cohan if the                  
          taxpayer is entitled to deduct some amount.  See id.  Here, as              
          discussed above at paragraph II-A-2-a, Cost Less may not deduct             
          any amount for Jasiak's promise not to compete because Jasiak and           
          petitioner intended to allocate none of the $175,000 payment to             
          Jasiak's promise.  Thus, Cohan does not apply.                              
                    d.   Cases Cited by Petitioners                                   
               Petitioners contend that this case is indistinguishable from           
          Standard Lumber & Hardware Co. v. Commissioner, supra, in which             
          we permitted the taxpayer to amortize the cost of a covenant not            
          to compete.  Petitioners contend that Standard Lumber & Hardware            
          Co. supports the proposition that Cost Less may allocate part of            
          the $175,000 payment to Jasiak to a covenant not to compete                 
          despite the terms of the written agreement of sale.  Petitioners            
          also contend that Standard Lumber & Hardware Co. supports the               





Page:  Previous  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  Next

Last modified: May 25, 2011