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For 1993, 1994, and 1995, Haas & Associates timely filed
corporation income tax returns. On Haas and his wife’s 1993
joint Federal income tax return and on Haas & Associates’ 1994
and 1995 corporation income tax returns, the $190,000 relating to
the covenant not to compete was amortized as an ordinary and
necessary business expense deduction, and the $63,500 relating to
consulting services was deducted in 1993 as an ordinary business
expense as follows:
Amortization Deduction
Deduction for Relating to
Covenant not Consulting
Year to Compete Services
Haas’ Joint
Income Tax Return 1993 $58,056 $63,500
Haas & Associates’
Corporation
Income Tax Return 1994 63,333 -–
1995 63,333 -–
On audit, respondent disallowed the above deductions
relating to the covenant not to compete and to the consulting
services. In the alternative only, if these deductions are not
allowed, petitioners claim that the $151,000 relating to the
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Last modified: May 25, 2011