- 22 - (5th Cir. 1994); Israel-British Bank (London), Ltd. v. FDIC, 536 F.2d 509, 512-513 (2d Cir. 1976); Edward B. Marks Music Corp. v. Colorado Magnetics, Inc., 497 F.2d 285, 288 (10th Cir. 1974).17 Respondent contends that, although not denominated as such, what Duskin acquired from petitioner was a territorial franchise for the operating and nonoperating countries. Petitioner, on the other hand, argues that it did not sell Duskin a franchise, but, rather, the entire Mister Donut franchising business in Asia and the Pacific. Petitioner maintains that the sale of a franchise requires the franchisor to retain an interest in the business and that petitioner failed to retain the requisite interest in this case following the sale to Duskin. Petitioner contends that section 1253(a) and our opinion in Jefferson-Pilot Corp. v. Commissioner, 98 T.C. 435 (1992), affd. 995 F.2d 530 (4th Cir. 1993), support its interpretation of "franchise". Although section 865 does not provide a definition of franchise, section 1253(b)(1) defines it for purposes of section 16(...continued) allocate any portion of the sale price to the franchise agreements. Instead, petitioner allocated $1,930,000 to goodwill and the covenant not to compete and later reported this amount as foreign source income on its 1989 Federal income tax return. Petitioner allocated the remaining $120,000 of the sale price to the trademarks and reported this amount as U.S. source income on its 1989 return. 17In Edward B. Marks Music Corp. v. Colorado Magnetics, Inc., 497 F.2d 285, 288 (10th Cir. 1974), the court stated that "it is the general rule that a proviso should be strictly construed to the end that an exception does not devour the general policy which a law may embody."Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Next
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