- 23 -
BDC, Mr. Langdon, and Bravo, in agreeing to this allocation, did
not have competing tax interests. Mr. Langdon, through Pohle
Partners, was well aware of the potential tax advantages to both
buyer and seller of allocating the entire $1 million to the
covenant.9
We also agree that it was unreasonable to have allocated
nothing to goodwill and going-concern value, including the value
of the distributorships. In its appraisal of BDC's business,
Pohle Partners concluded that the intangible assets (its customer
lists, franchise rights, goodwill, etc.), together with the
consulting agreement and covenant, were worth a combined $1.2
million. The record reflects that the intangible assets had
substantial value.
Neither party presented evidence as to the value of the
intangibles. The fact that the goodwill, or the value of the
company, as a going concern, was not mentioned in the contract of
9Pohle Partners provided to Mr. Langdon a 1988 article
entitled "Acquisition in Today's Beer World". In that article,
after mentioning the TRA 1986 changes discussed supra note 8, the
Pohles discuss the use of allocations to covenants not to compete
to alleviate potentially, in part, the effect of those tax law
changes, where the wholesale beer business of a closely held,
regular C corporation is being sold. The article notes that
these covenants will typically be with the individual
shareholders who own the corporation selling the business, and
further states: "In an asset sale, there is not a tax affect
within the [selling] corporation because the contracts are with
the individuals * * * Again, the purchaser is satisfied because
of the deductability [over the life of the covenant of the
payments made]".
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