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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
Jeep-Eagle.
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
year.
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