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addition to acquiring all the real estate and tangible personal
property that BDC used in that business, Bravo acquired BDC's
customer lists and exclusive brand and distribution rights in the
market area the business served. We find that substantial
goodwill and going-concern value was transferred by BDC.
Petitioners cite cases upholding large allocations to
covenants. These cases all predate the TRA 1986, and thus,
unlike here, involved parties with competing tax interests. See
Intl. Multifoods Corp. v. Commissioner, 108 T.C. 25, 46 (1997)
(cases upholding the contracting parties' allocation of a
specific amount to a covenant not to compete are premised upon
the assumption that the competing tax interests of the parties
will ensure that the allocation is the result of arm's-length
bargaining; where that assumption is unwarranted, there is no
reason to be bound to the allocation in the contract); Buffalo
Tool & Die Manufacturing Co. v. Commissioner, 74 T.C. at 446-448;
see also H. Rept. 101-881, at 351 (1990). The cases on which
petitioners rely are innapposite.
We reject respondent's proposed valuation of $121,000 as
unrealistically low and built upon faulty assumptions.
Petitioners, who did not offer an expert, have calculated, based
upon different discount rates and assumptions, that the covenant
is worth $2,247,992. This is totally unrealistic, inasmuch as it
exceeds the entire purchase price of the business. We therefore
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