Frontier Chevrolet Co. - Page 1
















                                   116 T.C. No. 23                                    


                               UNITED STATES TAX COURT                                


                        FRONTIER CHEVROLET CO., Petitioner v.                         
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      


               Docket No. 19627-98.                     Filed May 14, 2001.           


                    P entered into a stock sale agreement in which P                  
               redeemed 75 percent of its outstanding stock from C in                 
               exchange for monetary consideration.  P also entered                   
               into a noncompetition agreement in which P agreed to                   
               make monthly payments to C and S for a period of 5                     
               years so long as C and S agreed not to compete with P.                 
               P argues that it is permitted to amortize the                          
               noncompetition agreement payments over 60 months, the                  
               life of the agreement.                                                 
                    Held:  Sec. 197, I.R.C., requires that a covenant                 
               not to compete entered into in connection with a direct                
               or indirect acquisition of an interest in a trade or                   
               business be amortized over 15 years.  The                              
               noncompetition agreement was entered into in connection                
               with P’s redemption of its stock, which was an                         
               acquisition of an interest in a trade or business.  P                  
               must amortize the noncompetition agreement payments                    
               over 15 years.                                                         






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