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"method" of valuing the noncompete agreements, comparing the "net
price paid" for the stock and the noncompete agreements to the
value of State Supply, is highly suspect. Mr. Meade offers no
explanation or rationale for his methodology, nor can we provide
any.
Mr. Meade's report, as well as respondent's arguments, that
the noncompete agreements had nominal value, are antithetic to
common sense. The factors detailed above, when we analyzed
whether the noncompete agreements had economic reality,
overwhelmingly establish a strong need, and a corresponding high
relative value, for the noncompete agreements.
We found petitioners' expert report to be helpful, as it
used a methodology for valuing the noncompete agreements that was
clear and logical. See International Multifoods Corp. v.
Commissioner, 108 T.C. (1997). More importantly, we believe
the record shows that competition from Beaurline and Holliday
could have destroyed State Supply. Based on the record as a
whole, considering all of the facts and circumstances, we hold
that petitioners have met their burden of showing that the
noncompete agreements were worth at least $2.5 million.
To reflect the foregoing,
Decisions will be entered
for petitioners in docket Nos.
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