9
Respondent argues that Grecco was not concerned with the
allocation of the purchase price between her stock in petitioner
and the covenant not to compete, and that she was only concerned
with the total amount she would receive when she left petitioner.
None of these points establish that respondent had a basis
in fact for continuing to contend, after August 22, 1994, that
the covenant not to compete was worth $52,669. Respondent had
petitioner's expert's report on June 24, 1994 (3 months before
trial), and had respondent's expert's report on August 22, 1994
(one month before trial). Respondent did not concede that the
covenant was worth $324,100 (or any amount more than $52,669)
despite the fact that (a) petitioner's expert said that Grecco's
stock in petitioner was worth $190,000, respondent's expert said
it was worth $188,600, and the parties agreed that the stock was
worth $189,300, and (b) respondent presented no fact or theory to
support the conclusion that petitioner paid the remaining
$324,100 ($513,400 - 189,300 = $324,100) to Grecco for anything
other than the covenant not to compete. Respondent did not offer
a reasonable theory for why the covenant not to compete was worth
less than $324,100. Respondent's failure to reevaluate that
position after August 22, 1994, was unreasonable. Frisch v.
Commissioner, 87 T.C. 838, 841 (1986) (the Commissioner's
valuation position was unreasonable where the Commissioner had
the taxpayer's appraisal for 7 months before trial and did not
investigate further or reevaluate the Commissioner's own position
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