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this issue a Memorandum Opinion of this Court; F. & D.
Rentals, Inc. v. Commissioner, 44 T.C. 335, 345 (1965),
affd. 365 F.2d 34 (7th Cir. 1966)).
In determining which test to apply herein, we
first look to the circumstances under which the
allocation * * * [was agreed to]. * * * [Id. at 447.]
Although respondent originally argued that neither the
consulting agreement nor the covenant had economic reality,
respondent now concedes that the consulting agreement was worth
the $200,000 alotted to it, and that the covenant has economic
reality to the extent of $121,000. Our task, then, is to
establish the value of the covenant.
Relevant Factors
Courts have spelled out the relevant circumstances that must
be considered in evaluating a covenant not to compete. These
include: (a) The seller's (i.e., covenantor's) ability to
compete; (b) the seller's intent to compete; (c) the seller's
economic resources; (d) the potential damage to the buyer posed
by the seller's competition; (e) the seller's business expertise
in the industry; (f) the seller's contacts and relationships with
customers, suppliers, and others in the business; (g) the buyer's
interest in eliminating competition; (h) the duration and
geographic scope of the covenant, and (i) the seller's intention
to remain in the same geographic area. Lorvic Holdings, Inc. v.
Commissioner, supra (and cases cited therein); see also Thompson
v. Commissioner, T.C. Memo. 1997-287.
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