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Agreement “unnecessary” and therefore lacking in substance, but
we see nothing remarkable in petitioner’s and the Bank’s “belt
and suspenders” approach of wanting both. Finally, respondent
argues that the Noncompete Agreement lacked substance because it
was unenforceable under Texas law, due to its overly broad scope.
Petitioner responds, and we agree, that Texas courts would reform
an overly broad covenant. See Tex. Bus. & Com. Code Ann. sec.
15.51(c) (West 1990); Justin Belt Co. v. Yost, 502 S.W.2d 681
(Tex. 1974). Thus we conclude the Noncompete Agreement reflected
economic reality.
Did the Parties Allocate $300,000 to the Covenant Not To Compete?
The final and most difficult question concerns whether
petitioner has shown that petitioner and Wagner agreed to
allocate $300,000 to the Noncompete Agreement. That Wagner’s
covenant was indispensable to the buyout agreement does not
necessarily prove that the parties agreed to allocate any
specific portion of the consideration to it. See Better
Beverages, Inc. v. United States, 619 F.2d at 429-430; Delsea
Drive-In Theatres, Inc. v. Commissioner, 379 F.2d 316, 317 (3d
Cir. 1967), affg. per curiam T.C. Memo. 1966-6; Annabelle Candy
Co. v. Commissioner, 314 F.2d at 7. This might be true even
where the covenant was objectively worth the amount amortized, as
has been stipulated here. Petitioner must still show that the
parties to the buyout agreed to allocate the specific amount
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