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that the income attributable to the sale of this goodwill
constitutes foreign source income pursuant to section
865(d)(3).15
This argument mistakes goodwill for the intangible assets
which embody it. Goodwill represents an expectancy that "old
customers will resort to the old place" of business. Houston
Chronicle Publishing Co. v. United States, 481 F.2d 1240, 1247
(5th Cir. 1973); Canterbury v. Commissioner, 99 T.C. 223, 247
(1992). The essence of goodwill exists in a preexisting business
relationship founded upon a continuous course of dealing that can
be expected to continue indefinitely. Canterbury v.
Commissioner, supra at 247; Computing & Software, Inc. v.
Commissioner, 64 T.C. 223, 233 (1975). The Supreme Court has
explained that "The value of every intangible asset is related,
to a greater or lesser degree, to the expectation that customers
will continue their patronage [i.e., to goodwill]." Newark
Morning Ledger Co. v. United States, 507 U.S. 546, 556 (1993).
An asset does not constitute goodwill, however, simply because it
contributes to this expectancy of continued patronage.
Section 865(d)(1) provides that income from the sale of an
intangible asset by a U.S. resident will generally be sourced in
the United States. Section 865(d)(2) defines "intangible" to
15On brief, petitioner appears to concede that no goodwill
existed with respect to its trademarks in the nonoperating
countries, since it had no franchises in those countries or
customers who could "return" to Mister Donut stores.
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