Precision Pine & Timber, Inc. - Page 15




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          1278 (1938), affd. 112 F.2d 320 (7th Cir. 1940).  These events              
          are considered identifiable because they would be known by                  
          everyone interested in the business of the corporation.  The                
          essential element for tax purposes is that a particular event               
          destroyed the potential value of the asset.  Id.                            
               In 1995, as a result of the Mexican Spotted Owl's addition             
          to the endangered species list, the U.S. District Court of                  
          Arizona issued a prohibitory injunction banning logging in areas            
          serving as the owl's habitat.  Once the injunction was issued,              
          there were no additional timber sales contracts to compete for              
          and logging companies were unable to continue work on their                 
          existing contracts.  In 1995, there was no reasonable hope or               
          expectation that the injunction on logging would be lifted within           
          the period remaining on the noncompetition agreements because               
          there was no reason to assume that the owl would be removed from            
          the endangered species list.                                                
               It was objectively reasonable to assume that petitioner's              
          covenants not to compete were worthless because the ban on                  
          logging, which included the geographical areas covered by the               
          noncompetition agreements, made it legally impossible for any of            
          the covenantees to compete.  As a result, Reidhead, Parker, and             
          Kaibab were unable to reenter the logging industry because no new           
          logging contracts were being issued.  The functional elimination            








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