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such that reasonable people might bargain or contract for such an
agreement. Schulz v. Commissioner, 294 F.2d 52, 55 (9th Cir.
1961), affg. 34 T.C. 235 (1960). This particular test is
referred to as the "economic reality" test. Patterson v.
Commissioner, 810 F.2d 562, 571 (6th Cir. 1987), affg. T.C. Memo.
1985-53. An allocation to a covenant not to compete lacks
economic reality in the event that there is no showing that the
seller by refraining from competition stands to lose earnings
comparable to the amount supposedly paid for the covenant or that
the buyer would lose such an amount if the seller were to compete
against it. Forward Communications Corp. v. United States, 221
Ct. Cl. 582, 608 F.2d 485, 493-494 (1979).
The courts apply numerous factors in evaluating a covenant
not to compete. These include: (a) The seller's (i.e.,
covenantor's) ability to compete; (b) the seller's intent to
compete; (c) the seller's economic resources; (d) the potential
damage to the buyer posed by the seller's competition; (e) the
seller's business expertise in the industry; (f) the seller's
contacts and relationships with customers, suppliers, and others
in the business; (g) the buyer's interest in eliminating
competition; (h) the duration and geographic scope of the
covenant, and (i) the seller's intention to remain in the same
geographic area. Kalamazoo Oil Co. v. Commissioner, 683 F.2d 618
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