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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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