Charles B. and Teresa A. Thompson, et al. - Page 22

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          taking place in each of the first 3 years after the sale.  The              
          end result was that Mr. Mitchell valued the noncompete                      
          agreements, in the aggregate, at $2,464,752, which he rounded up            
          to $2.5 million.                                                            
          Effect of Employment Agreements on Valuation                                
               Respondent's main argument5 against the petitioners' expert            
          valuation of the noncompete agreements is that the employment               
          agreements entered into by Holliday and Beaurline effectively               
          prevented any possibility of competition for the year they were             
          in effect.  Once the possibility of competition is eliminated for           
          the first year after the sale, respondent argues that even                  
          petitioners' expert calculations would only support a value of              
          $400,000 for the noncompete agreements (the highest risk of                 
          competition coming in the first year after the sale). Respondent            
          is mistaken.                                                                
               We dealt with this argument in Peterson Mach. Tool, Inc. v.            
          Commissioner, 79 T.C. 72, 85 (1982) affd. 54 AFTR 2d 84-5407, 84-           
          2 USTC par. 9885 (10th Cir. 1984):                                          
               The fact that Moses [grantor of the covenant] signed an                
               employment contract with Peterson, Inc., for the                       
               duration of his covenant not to compete is entitled to                 
               weight, but is not determinative.  Maseeh v.                           
               Commissioner, 52 T.C. 18, 23 (1969).  There was always                 


               5  Incredibly, respondent argues that petitioners' expert              
          report should be ignored since it "was prepared for tax purposes            
          and for this specific litigation."  We should hope so.  See Rule            
          143(f).  Respondent's expert report was prepared under like                 
          circumstances.                                                              





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