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Discussion
Respondent's position is that petitioner is not justified in
taking loss deductions relating to the unamortized balance of the
noncompetition agreements. Respondent believes that the
injunction issued by the U.S. District Court of Arizona did not
interfere with the noncompetition agreements, and the correct tax
treatment was to continue to ratably deduct the values of the
noncompetition agreements over their respective lives.
Petitioner argues that the downturn in the local logging
industry, due to the Mexican Spotted Owl's addition to the
endangered species list and the ensuing injunction issued by the
district court, makes the noncompetition agreements economically
useless because of reasonably foreseeable economic changes due to
legislative or regulatory action. Petitioner argues that it is
entitled to its loss deductions in FYE March 31, 1996, and the
loss carryback to FYE March 31, 1993, pursuant to section 167 and
its governing regulations. Specifically, petitioner cites
1.167(a)-9, Income Tax Regs., as authority for its deductions.
Respondent argues that section 1.167(a)-8, Income Tax Regs.,
controls the outcome of this case. Respondent argues that
because petitioner alleges that the obsolescence in this case was
sudden, the penultimate sentence of 1.167(a)-9, Income Tax Regs.,
shifts the analysis to section 1.167(a)-8, Income Tax Regs.
Basing his position on ABCO Oil Corp. v. Commissioner, T.C. Memo.
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