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Accuracy-Related Penalty
Tax Year Ending Deficiency Sec. 6662(a)
Jan. 31, 1992 $1,320,879 $264,404
Jan. 31, 1993 1,472,023 294,244
Jan. 31, 1994 778,098 155,244
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
Following concessions, the primary issues for decision are:
(1) Whether $5 million paid to a stockholder constitutes an
amortizable business expense for a covenant not to compete or a
nondeductible capital expenditure; (2) whether $1,199,000 paid to
employees constitutes currently deductible payments for services
rendered or nondeductible payments for a covenant not to compete
amortizable only in years not before the Court; (3) whether other
claimed business expenses constitute nondeductible capital
expenditures; and (4) the value of options issued on August 25,
1989, for purposes of calculating original issue discount
associated with a loan.
FINDINGS OF FACT
Some of the facts are stipulated and are so found. When the
petition was filed, petitioner's principal place of business was
located in Morgan Hill, California.
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