- 16 -
F. Petitioner's Income Tax Returns
Petitioner timely filed its Federal income tax returns
for taxable years ending September 30, 1988, 1989, and 1990.
Petitioner's allocation of assets on its returns was consistent
with its allocation in the written agreement.
OPINION
A. Fair Market Value of the Covenants Not To Compete on
March 1, 1988
1. Positions of the Parties and Burden of Proof
Respondent determined that the fair market value of the
covenants not to compete was $750,000 on March 1, 1988. In an
amendment to answer, respondent asserts that the value was
$403,000. Petitioner contends that the total value of the three
covenants was $1.5 million ($1.2 million for D.C. Walker,
$150,000 for Mary Walker, and $150,000 for Bebout) as allocated
by petitioner on the sale agreement and reported on its Federal
income tax returns. Alternatively, based on petitioner's
expert's opinion, petitioner contends that the total value was
$1,650,000.
Respondent's determination is presumed to be correct,
and petitioner bears the burden of proving that respondent's
determination is incorrect. Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933). Thus, petitioner bears the burden
of proving that the covenants are worth more than $750,000.
Respondent bears the burden of proving that the covenants
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011