Precision Pine & Timber, Inc. - Page 16
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of Arizona's logging industry rendered worthless most industry
specific intangible assets.
After the issuance of the injunction, petitioner was unable
to derive any benefit from the covenants not to compete. No
outside party would have purchased the noncompetition agreements
or assigned any value to the covenants on the purchase of
petitioner's assets. Any remaining value of the noncompetition
agreements terminated upon the issuance of the prohibitory
injunction. The injunction served as a death knell to any
individual or company seeking to enter or reenter the Arizona
logging industry. Furthermore, respondent offered no evidence to
show that the covenants not to compete retained any value. In
short, the covenants were not worth a hoot.
Because the injunction issued by the district court was
effective in 1995, petitioner actually sustained losses on its
covenants not to compete in 1995. See Corra Resources, Ltd. v.
Commissioner, 945 F.2d 224 (7th Cir. 1991) (loss realized in the
year in which mineral lease expired), affg. T.C. Memo 1990-133;
George Freitas Dairy, Inc. v. United States, 582 F.2d 500 (9th
Cir. 1978) (milk processors' acceptance of producers'
cancellation of milk production contract was the identifiable
The Court is satisfied that the issuance of the injunction
serves as a sufficient identifiable event, in FYE March 31, 1996,
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