William Norwalk, Transferee, et al. - Page 16

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          for an accountant's pay, he found that the corporation did not              
          have excess earnings or earnings over and above a return on                 
          tangible assets.  Consequently, petitioners' expert concluded               
          that the corporation was worth the value of its tangible assets5            
          and that there was no intangible or goodwill value at the time of           
          the distribution to the shareholders.  He then addressed the                
          valuation of the corporation's client list.  Recognizing that in            
          a service-related business the client relationship is normally              
          between the client and the professional who services that client,           
          petitioners' expert concluded that "Without an effective non-               
          competition agreement, the clients have no meaningful value."               
          Recognizing that there was no restriction on the ability of the             
          individual accountants to compete with the corporation, he                  
          concluded that the client-related goodwill and intangibles                  
          belonged to the professional accountants (individually) who                 
          serviced the clients and that a list of these clients had no                
          material value.                                                             
               We have held that there is no salable goodwill where, as               
          here, the business of a corporation is dependent upon its key               
          employees, unless they enter into a covenant not to compete with            
          the corporation or other agreement whereby their personal                   
          relationships with clients become property of the corporation.              

               5Petitioners' expert expressed no opinion with respect to              
          the value of the tangible assets of the corporation.                        

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