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include, among other things, secret processes or formulas,
goodwill, trademarks, and franchises. Section 865(d)(3) then
provides a special rule for goodwill, sourcing it in the country
in which it was generated.
Petitioner's argument equates goodwill with the other assets
listed in the definition of "intangible" in section 865(d)(2).
This Court has recognized that intangible assets such as
trademarks and franchises are "inextricably related" to goodwill.
Canterbury v. Commissioner, supra at 249-251; see also Philip
Morris, Inc. v. Commissioner, 96 T.C. 606, 634 (1991), affd.
without published opinion 970 F.2d 897 (2d Cir. 1992). However,
we believe that Congress' enumeration of goodwill in section
865(d)(2) as a separate intangible asset necessarily indicates
that the special sourcing rule contained in section 865(d)(3) is
applicable only where goodwill is separate from the other
intangible assets that are specifically listed in section
865(d)(2). If the sourcing provision contained in section
865(d)(3) also extended to the goodwill element embodied in the
other intangible assets enumerated in section 865(d)(2), the
exception would swallow the rule. Such an interpretation would
nullify the general rule that income from the sale of an
intangible asset by a U.S. resident is to be sourced in the
United States.16 See Torres v. McDermott Inc., 12 F.3d 521, 526
16Indeed, in the purchase agreement, petitioner failed to
(continued...)
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