Beaver Bolt Inc. - Page 2

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                  The issues for decision are:                                                          
                  (1) Whether petitioner may amortize $383,400, or some other                           
            amount, for Jane Grecco's covenant not to compete.  We hold that                            
            petitioner may amortize $324,100.                                                           
                  (2) Whether petitioner is liable for additions to tax for:                            
            (a) Negligence under section 6653(a) for 1989; (b) valuation                                
            overstatement under section 6659 for 1989; (c) substantial                                  
            understatement under section 6661 in the alternative to section                             
            6659 for 1989; and (d) an accuracy related penalty under section                            
            6662(h) for gross valuation misstatement, or, in the alternative,                           
            under section 6662(a).  We hold that it is not.                                             
                  Section references are to the Internal Revenue Code in                                
            effect for the years in issue.  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.                              
            1.    Formation of Petitioner and Petitioner's Operations                                   
                  Petitioner had its principal place of business in Portland,                           
            Oregon, during the years in issue and when it filed its petition.                           
            Petitioner is in the business of marketing and distributing                                 
            bolts, nuts, and other fasteners.                                                           
                  Jane Grecco (Grecco), James Colbert (Colbert), and Dan Allen                          
            (Allen) formed petitioner in 1979.  They each had experience                                
            distributing bolts, nuts, and other fasteners.  Grecco and                                  





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