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nontax considerations underlying the particular allocation of
$300,000 to the covenant are probative regarding whether the
allocation should be treated as bargained for by the parties, and
on balance we are persuaded that it should, even under a standard
of strict scrutiny. Therefore we conclude that petitioner has
shown that an allocation of $300,000 to the covenant not to
compete was intended by the parties.
Based on the foregoing, we shall not sustain respondent’s
determination disallowing petitioner’s deductions with respect to
a covenant not to compete.
Accuracy-Related Penalties
Because we do not sustain respondent’s disallowance of
petitioner’s amortization deductions, there is no underpayment in
this case, and petitioner is not liable for accuracy-related
penalties under section 6662(a).
To reflect the foregoing,
Decision will be entered
for petitioner.
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