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normal to the industry, which were far less than the
corporation's actual operating costs. These approximations are
not in line with the actual experience of the corporation, and
the record does not establish that there was any reasonable
expectation that such costs could have been so reduced. See
Estate of Krafft v. Commissioner, T.C. Memo. 1961-305.
More importantly, respondent's experts valued the
corporation's client list and goodwill as if a covenant not to
compete was in effect on the date of distribution. Respondent's
expert, Mr. Kettell, testified that such a restriction is a very
important factor in valuing the intangibles of the corporation.
However, we have found that there were no restrictions on the
corporation's employees to compete with it on the date of
distribution. Nevertheless, in determining the corporation's
value, respondent's experts relied upon the restrictions
expressed in the partnership agreement executed by Messrs.
DeMarta and Norwalk after the distribution of the corporation's
assets. The parties to the partnership agreement are Messrs.
DeMarta and Norwalk and the existing partners of the partnership,
not the corporation. This agreement was not enforceable by the
corporation and should have no bearing on the valuation of the
corporation on the date that it distributed its assets.
In view of the foregoing, we conclude that there were no
transferable "customer-based intangibles" belonging to the
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