- 28 -
compared petitioner's projected net income with and without the
agreements. We think, however, that petitioner's expert
witnesses, Dr. Schutte and Lee, overestimated the value of the
covenant not to compete and the secrecy agreement. Both experts
relied too heavily on unwarranted assumptions. Both Lee and Dr.
Schutte did not identify with particularity the factor(s) that
would have impelled Scherer to compete. The only material
factors that Dr. Schutte and Lee could point to were threefold:
(1) Scherer possibly retained an institutional record of
sensitive information regarding Old Lorvic's products, suppliers,
distributors, and marketing data; (2) Scherer was familiar with
the products that were relatively simple to manufacture, and
rendered significant returns on Old Lorvic's initial investment;
and (3) Scherer had the capability of competing with Old Lorvic,
and might, at any given point in time, reassess its initial
decision to leave the specialized dental care market.10
10Also, in the instant case, petitioner relies heavily on
Thompson v. Commissioner, T.C. Memo. 1997-287. We, however, find
the citation to Thompson, to be inapposite. In the foregoing
case, the taxpayers were individuals who had extensive knowledge
and experience of the beauty supply business, as well as
substantial relationships with suppliers and distributors.
Accordingly, the record there "overwhelmingly [established] a
strong need, and a corresponding high relative value," for the
noncompete agreements. Thompson. Here, petitioner, a
corporation, has not demonstrated that there was an overwhelming
need for the noncompete agreements. Further, in Thompson, there
was an ample record of negotiations between the parties regarding
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