- 11 -
thereunder specifically allocated $76,000 of the purchase price
paid by Donald C. Chiappetti to the "Covenant Not to Compete
executed by Dr. Donald L. Chiappetti" (emphasis added), that is
to say, to the agreement of petitioner, and not CPC, to refrain
from practicing dentistry and from soliciting its patients as
provided therein. Neither that exhibit nor any other provision
in the purchase contract allocated $76,000 (or any other portion
of the purchase price) to what petitioners' claim was CPC's
obligation to refrain from soliciting its patient base. In fact,
there is no reference whatsoever in the purchase contract to an
item called a "patient base" of CPC.6
Petitioners also argue that, because the $125,000 that
Donald C. Chiappetti paid under the purchase contract, including
the $76,000 that was allocated by that contract to the covenant
not to compete, was paid to CPC, and not to petitioner, the
covenant not to compete was an asset of CPC. We disagree.
Regardless who received the income attributable to the covenant
not to compete, the true earner of that income is liable for the
tax on it and cannot escape that tax by assigning the income to
another taxpayer. See Lucas v. Earl, 281 U.S. 111 (1930). In
the instant case, petitioner in his individual capacity, and not
6 We note that sec. 4 of the purchase contract and exhibit A
attached thereto allocated $5,000 of the $125,000 purchase price
to an item described as "Goodwill" and $5,000 to an item de-
scribed as "Patient Records" in sec. 4 and as "All patient and
office records belonging to CPC" in exhibit A.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011