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the covenants and not the bare possibility of what might happen
in the uncertain future that is the important factor. Lucas v.
American Code Co., supra; Henley v. United States, 184 Ct. Cl.
315, 396 F.2d 956, 962 (1968). The tax laws do not require a
taxpayer to be an incorrigible optimist. United States v. S.S.
White Dental Manufacturing Co., 274 U.S. 398, 403 (1927).
For the tax year of the injunction, petitioner's corporate
tax return for FYE March 31, 1996, reflected this subjective
determination by reporting the unamortized amounts as a loss.
The Court is satisfied that petitioner made the subjective
determination that its covenants not to compete were worthless in
FYE March 31, 1996, and that it no longer assigned any value to
them.
The second prong of the worthlessness test requires
taxpayers to show a closed and completed transaction and an
identifiable event evidencing the destruction of an asset's
value. Assets may not be considered worthless, even when they
have no liquidated value, if there is a reasonable hope and
expectation that they will become valuable in the future. See
Lawson v. Commissioner, 42 B.T.A. 1103, 1108 (1940). But, "such
hope and expectation may be foreclosed by the happening of
certain events such as the bankruptcy, cessation from doing
business, or liquidation of the corporation, or the appointment
of a receiver for it." Morton v. Commissioner, 38 B.T.A. 1270,
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