- 36 -
covenant at $620,000,22 almost $200,000 less than the amount
allocated by petitioner in the purchase agreement with Duskin.
Although expert opinions can assist the Court in evaluating a
claim, we are not bound by the opinion of any expert and may
reach a decision based on our own analysis of all the evidence in
the record. Helvering v. National Grocery Co., 304 U.S. 282, 295
(1938); Silverman v. Commissioner, 538 F.2d 927, 933 (2d Cir.
1976), affg. T.C. Memo. 1974-285.
Mr. Reilly computed the value of the covenant not to compete
under the comparative business valuation method and a discounted
net cash-flow analysis. Utilizing this comparative approach, Mr.
Reilly computed Mister Donut's discounted net cash-flow under two
scenarios. Scenario 1 assumed that the covenant was in place,
and petitioner could not reenter the Asian and Pacific donut
market. Scenario 2 assumed that the purchaser did not receive a
covenant, and petitioner would reenter the market and compete.
Mr. Reilly attributed the difference in the sum of Mister Donut's
discounted net cash-flows under these two scenarios to the
22Mr. Reilly's report contained the following allocation:
Asset Fair Market Value
Non-compete agreement $620,000
Trade secrets and know-how 50,000
Trademarks and trade names 370,000
Existing franchise agreements 200,000
Goodwill 810,000
Total 2,050,000
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