Lorvic Holdings, Inc. - Page 16

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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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