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primarily to the noncompetition agreements each of these
individuals entered into, not to payments for services rendered
in prior years. Because Panzica’s, Battistella’s, and Navarra’s
3-year noncompetition obligations were not triggered until they
left employment with petitioner and because, in 1990, Panzica,
Battistella, and Navarra still worked for petitioner, respondent
determined that no portion of the $1.25 million should be
deducted in 1990 or in later years before the Court.
For 1992, respondent disallowed the $1,342,347 that
petitioner claimed as deductible financing charges on the grounds
that the expenses constitute nondeductible capital expenditures
relating to acquisition of the stock in petitioner. Respondent
now agrees that $692,347 of the $1,342,347 was properly deducted
by petitioner as ordinary business expenses. Only $650,000
remains in dispute as alleged nondeductible capital expenditures.
Although not claimed on its 1990 through 1994 corporate
Federal income tax returns as filed, petitioner in its petition
affirmatively asserts beginning for 1990 (in order to increase or
to maintain the amount of the NOL claimed from 1990) and later
years, or beginning for 1992 and later years, that it is entitled
to amortize a portion of the claimed $3,068,750 as original issue
discount relating to the options that were issued to FNBB.
Alternatively, petitioner argues that the $3,068,750 should be
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