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(Sumitomo) was one of the Walker entities' customers. Sumitomo
was not a customer of petitioner before the Walker asset sale,
but was after it.
The Walker entities remained obligated to perform the timber
contracts that petitioner did not buy from them. After the sale,
the Walker entities owed more than $4.65 million to the
Government for timber sales. However, the Walker entities could
harvest the timber under those timber contracts and sell the
logs.
The Walker entities agreed to terminate their employees the
day before the sale. Petitioner rehired about one-half of the
employees from the Walker entities.
7. The Walkers’ Tax Court Case for Taxable Year 1988
The Commissioner proposed adjustments to the individual tax
returns of D.C. and Mary Walker and Bebout for taxable year 1988.
The Commissioner determined that part of the value assigned by
each of them to the covenants not to compete should be
reallocated to land and going-concern value. Each of them
contested the adjustments by petitioning the Tax Court, but later
conceded the adjustments in full. They each later filed amended
returns to be consistent with the 1988 adjustments. The tax
impact of the adjustments was essentially neutral.
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