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the covenant not to compete. William and Mary Ann Becker filed a
petition with this Court on August 26, 2002, seeking a
redetermination of the deficiency.
On its Federal consolidated corporate income tax return for
the taxable year ended September 30, 1996, BHC claimed an
amortization deduction of $5,307,600 attributable to the covenant
not to compete. As a result of this and other deductions, BHC
generated a net operating loss in 1996 and filed a Form 1139,
Corporation Application for a Tentative Refund, to carry back
that loss to its taxable years ended September 30, 1993,
September 30, 1994, and September 30, 1995. On January 30, 2003,
respondent issued a notice of deficiency disallowing, inter alia,
BHC’s amortization deduction taken in 1996. Respondent
determined deficiencies in BHC’s Federal income tax of
$1,566,852, $86,973, and $245,644, respectively, for BHC’s
taxable years ended September 30, 1993, September 30, 1994, and
September 30, 1995. BHC filed a petition with this Court on
April 29, 2003, seeking a redetermination of the deficiencies.
OPINION
William Becker and BHC have divergent views regarding the
characterization of the transaction under review and its tax
consequences. William Becker contends that the total
consideration paid under the purchase documents is attributable
to his corporate stock in BHC, a capital asset, resulting in
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Last modified: May 25, 2011