- 12 -
CPC, agreed to refrain from practicing dentistry and from solic-
iting patients as provided in the covenant not to compete.
Consequently, we find that petitioner, and not CPC, must recog-
nize the income that Donald C. Chiappetti paid for petitioner's
agreement to so refrain, even though he may have paid it to CPC.
Petitioners further argue that, because exhibit A attached
to the purchase contract that allocated the $125,000 purchase
price to various items acquired thereunder referred to the cove-
nant not to compete as an asset of CPC, the $76,000 that Donald
C. Chiappetti paid to purchase that covenant is income to CPC
from the sale of that asset. Petitioners' argument is without
merit. Regardless whether the purchase contract referred to the
covenant not to compete as an asset of CPC, it was petitioner,
and not CPC, who promised to refrain from practicing dentistry
and from soliciting patients as specified in that covenant.
Consequently, petitioner, and not CPC, must recognize the income
attributable to that promise. See Montesi v. Commissioner, 340
F.2d at 99-100.
Petitioners also contend that if petitioner, and not CPC,
had been the person obligated by the covenant not to compete,
that covenant would have had little or no value, since petitioner
intended to, and did, retire from the practice of dentistry at
the time the purchase contract was executed. Therefore, accord-
ing to petitioners, in order for that covenant to have been
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