15 that the fair market value of the rights acquired by petitioner and claimed by her as a cost basis was equal to $588,019.52, the total amount which was to be withheld from her commissions according to the agreement. Moreover, the withholdings were contingent on her success in earning commissions. She has failed to establish that any amount approximating the $588,019.52 was likely to be paid. Further, the material facts in this case are virtually identical to the facts present in Wakefield v. Commissioner, T.C. Memo. 1995-318. In that case, the taxpayers as Safeguard distributors claimed deductions for amortization with respect to certain customer lists acquired in connection with their distributorships. The taxpayers did not make any cash payments when they signed their distributorship agreements. Safeguard was to withhold 30 percent of the taxpayers' commissions on the sale of Safeguard products to be applied against the purchase price of customer lists. The taxpayers were not liable for any payments once they ceased to be Safeguard distributors. The Court found that the taxpayers' obligations were nonrecourse and contingent on their success in earning commissions. Id. In addition, the Court found that the taxpayers had not established that the fair market value of the lists was equal to their stated purchase price, nor had they established that payment of the obligations was likely. Id. Therefore, the Court concluded that thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011