- 12 -
A taxpayer generally may amortize intangible assets over
their useful lives. Sec. 167(a); Citizens & S. Corp. v.
Commissioner, 91 T.C. 463, 479 (1988), affd. 919 F.2d 1492 (11th
Cir. 1990). To be amortizable, an intangible asset must have an
ascertainable value and a limited useful life, the duration of
which can be ascertained with reasonable accuracy. Newark
Morning Ledger Co. v. United States, 507 U.S. ___, ___, 113 S.
Ct. 1670, 1675, 1676 n.9, 1681-1683 (1993). A covenant not to
compete is an intangible asset that has a limited useful life
and, therefore, may be amortized over its useful life. Warsaw
Photographic Associates v. Commissioner, 84 T.C. 21, 48 (1985);
O'Dell & Co. v. Commissioner, 61 T.C. 461, 467 (1974).
We must decide whether any of the amount allocated to the
covenant not to compete was a disguised payment for Grecco's
stock in petitioner. The amount a taxpayer allocates to a
covenant not to compete is not always controlling for tax
purposes. Lemery v. Commissioner, 52 T.C. 367, 375 (1969), affd.
per curiam 451 F.2d 173 (9th Cir. 1971). We strictly scrutinize
an allocation if the parties do not have adverse tax interests
because adverse tax interests deter allocations which lack
economic reality. Wilkof v. Commissioner, 636 F.2d 1139 (6th
Cir. 1981), affg. per curiam T.C. Memo. 1978-496; Haber v.
Commissioner, 52 T.C. 255, 266 (1969), affd. without opinion 422
F.2d 198 (5th Cir. 1970); Roschuni v. Commissioner, 29 T.C. 1193,
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011