- 17 -
its factual similarities and because the result in this case
depends on the law as it pertains to section 1.167(a)-8(a)(3),
Income Tax Regs. Respondent's argument is flawed on both
accounts.
The facts in ABCO Oil Corp. are distinguishable from those
here. Respondent's position seems to be that the death of the
covenantees in ABCO Oil Corp. is analogous to the district
court's injunction in this case. Respondent argues that because
petitioner and the three covenantees were still contractually
bound by the agreements the covenants retained their current
values. In ABCO Oil Corp., the taxpayer continued to make
payments on the noncompetition agreements to the deceased
covenantees for more than 4 years after their deaths. Thus, it
was logical for the Court in ABCO Oil Corp. to conclude that the
covenants were not worthless because no subjective determination
of worthlessness was made by the taxpayer during the taxable year
in issue.
In this case, the prohibitory injunction rendered
petitioner's noncompetition agreements worthless. In FYE March
31, 1996, petitioner was cognizant of its losses and promptly
reported the losses on its corporate tax return. The facts in
ABCO Oil Corp. bear on a situation different from the one
presented here, and as a result, the Court's holding in ABCO Oil
Corp. is inapposite to the present case.
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011