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Petitioners argue in the alternative that respondent’s
determination under section 6662(a) is wrong because they acted
in good faith and with reasonable cause in reporting only $20,000
of capital gain in their joint return for the year at issue with
respect to Mr. Enyart’s receipt during that year of the B&L
equipment. To support that alternative argument, petitioners
contend (1) that there was no statutory or case law to guide them
in reporting Mr. Enyart’s receipt of the B&L equipment as consid-
eration for Mr. Enyart’s covenant and (2) that they relied on Mr.
Fyffe to prepare their joint return. On the record before us, we
reject petitioners’ alternative position under section 6662(a).
Gross income includes the fair market value of property
received in payment for services. See sec. 1.61-2(d)(1), Income
Tax Regs. We have found that “Amounts paid by a purchaser to a
seller for a covenant not to compete are ordinary income to the
seller since they are tantamount to payments for services.”
Schmitz v. Commissioner, 51 T.C. 306, 313 (1968), affd. 457 F.2d
1022 (9th Cir. 1972). See generally Montesi v. Commissioner, 340
F.2d 97, 100 (6th Cir. 1965), affg. 40 T.C. 511 (1963); Schaefer
v. Commissioner, 105 T.C. 227, 231-232 (1995). We have found
that petitioners have failed to show that the value of the B&L
equipment which B&L transferred to Mr. Enyart during the year at
issue was less than $300,000. On the record before us, we reject
petitioners’ contention that there was no statutory or case law
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