Heritage Auto Center, Inc. - Page 14

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               After operating the Suzuki dealership for a short time,                
          petitioner terminated the Suzuki franchise because of adverse               
          consumer reports concerning Suzuki automobiles.  Heritage Suzuki,           
          Inc., discontinued operations as an authorized Suzuki dealer                
          during January 1989, and it was merged into petitioner on March             
          22, 1989.  Thereafter, petitioner used the Heritage Suzuki                  
          facilities for repair services and the sale of used vehicles and            
          parts.                                                                      
               On the E.W. Richardson Dealerships' combined financial                 
          statements dated December 31, 1988, and on petitioner's separate            
          financial statements dated December 31, 1989, and December 31,              
          1990, payment for the final agreement was treated as payment for            
          goodwill and was amortized on a straight-line basis over 40                 
          years.  However, the financial statement treatment was not                  
          consistent with petitioner's income tax treatment of the                    
          transaction.                                                                
               The $675,000 allocated to the covenant not to compete was              
          prepaid at closing.  The $675,000 allocated to the consulting               
          agreement was also prepaid at closing.                                      
               Petitioner attached Form 8594, Asset Acquisition Statement             
          Under Section 1060, to its Federal income tax return, Form 1120,            
          filed for the taxable year 1988.  On that form, petitioner                  
          reported $675,000 for the covenant not to compete and $675,000              
          for the consulting agreement as the fair market value of                    
          intangible, amortizable assets with useful lives of 3 years.  On            




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