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In 1995, petitioner's assets and liabilities were sold to
Young Innovations (Young), an international supplier of dental
products, for approximately $15.2 million. The acquired assets
included cash in petitioner's possession of $1.7 million and
corresponding liabilities were $2.4 million. Simultaneously,
Richard Nemanick entered into an employment and noncompetition
agreement with Young. In the process, he also entered into a
consulting agreement which included a nondisclosure provision.
However, Leck did not execute a noncompete agreement in favor of
Young.
OPINION
In this instance, the dispute here centers on how much, if
any, petitioner may amortize for the covenant not to compete and
the related secrecy agreement. Stated in a different manner, the
issue for our decision is whether any portion of the $2 million
and $1 million paid to Scherer pursuant to the 1989 transaction
is properly allocable to the covenant not to compete and the
secrecy agreement, respectively. Respondent asserts that the
payments pursuant to the agreements were, in substance, payments
for the sale of nonamortizable goodwill or going-concern value.
Petitioner argues that such deductions are allowable. In this
regard, petitioner bears the burden of proof. Rule 142(a); Welch
v. Helvering, 290 U.S. 111, 115 (1933).
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