Howard Pontiac-GMC, Inc. - Page 10

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               Petitioner was fearful that Mr. Markley would be a                     
          competitive threat by (1) acquiring a new Jeep-Eagle                        
          franchise in a suburb of Oklahoma City (as he had done when he              
          was a Ford dealer in Yukon) (2) acquiring an existing Jeep-Eagle            
          dealership or (3) going to work for an existing competitor.                 
               The covenant not to compete is for a 3-year term and covers            
          Oklahoma, Canadian, Logan, Pottawatomie, Lincoln, and Cleveland             
          Counties.  The covenant not to compete does not preclude seller             
          and/or Mr. Markley from competing with petitioner in Kingfisher             
          County, which county is adjacent to Oklahoma County and is less             
          than 15 miles from petitioner's automall, from competing with               
          petitioner by working for or with any dealership, including Jeep-           
          Eagle, for compensation of less than $100,000 per year, or from             
          competing with petitioner by obtaining any franchise other than             
          Deductions for Amortization                                                 
               For the taxable years 1990, 1991, and 1992, petitioner                 
          deducted $163,000, $163,500, and $163,500, respectively, as                 
          amortization of the covenant not to compete.                                
          Respondent's Notice of Deficiency                                           
               In the notice of deficiency dated February 2, 1995, upon               
          which this case is based, respondent disallowed petitioner's                
          deduction for amortization of the covenant not to compete for the           
          taxable years 1990 and 1991 to the extent of $121,330 for each              

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