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provided, in part, that for a period of 3 years Mr. Becker would
not “directly or indirectly engage in the processing or sale of
citrus concentrate or fresh juices” (covenant not to compete).
The total stated consideration for the transaction was
$23,953,934 plus interest, payable over a period of 5 years. In
its Federal income tax return for the tax year ending September
30, 1996, petitioner deducted $5,307,600 as an amortization
expense. Respondent’s Examination Division disallowed the
amortization deduction in its entirety.
The case at bar was assigned to Appeals Officer Neil Kaufman
(Mr. Kaufman) to see whether it could be administratively
resolved. Mr. Kaufman was also assigned the case involving Mr.
Becker (the Becker case) in which the Examination Division took
the position that $5,307,600 was allocable to the covenant not to
compete, resulting in Mr. Becker’s having to recognize $5,307,600
of ordinary income in 1996. Terri N. Beach (Ms. Beach) was Mr.
Kaufman’s supervisor and held the position of Appeals Team
Manager.
The parties executed Form 872, Consent to Extend the Time to
Assess Tax, extending the period of limitations for the years at
issue to June 30, 2002. Shortly thereafter, Lawrence Y. Leonard
(Mr. Leonard) undertook the representation of petitioner before
respondent’s Appeals Office (Appeals). Mr. Leonard was aware
that Mr. Kaufman had also been assigned the Becker case.
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