R. William Becker and Mary Ann Becker - Page 12

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          long-term capital gain.  See secs. 1221, 1222, 1223.7  If this              
          characterization were carried over to BHC’s income tax return,              
          BHC would have, for the tax years involved, no amortization                 
          deduction because it would not be acquiring an amortizable asset.           
               BHC contends that it purchased not only the corporate stock,           
          but also a covenant not to compete, and that at least $5,307,600            
          of the consideration paid in 1996 should be allocated to the                
          covenant, resulting in an amortization deduction for that year.8            
          If this characterization of the transaction were carried over to            
          William Becker’s individual income tax return for 1996, he would            
          have to include the portion of the consideration received                   
          attributable to the covenant not to compete as ordinary income.             
          See Sonnleitner v. Commissioner, 598 F.2d 464, 466 (5th Cir.                
          1979), affg. T.C. Memo. 1976-249; Montesi v. Commissioner, 340              
          F.2d 97, 100 (6th Cir. 1965), affg. 40 T.C. 511 (1963); Jorgl v.            
          Commissioner, T.C. Memo. 2000-10, affd. per curiam without                  
          published opinion 264 F.3d 1145 (11th Cir. 2001).                           


               7    Unless otherwise indicated, all section references are            
          to the Internal Revenue Code, as amended, and all Rule references           
          are to the Tax Court Rules of Practice and Procedure.                       
               8  See sec. 1.167(a)-3, Income Tax Regs.  Sec. 197,                    
          requiring amortization of a covenant not to compete ratably over            
          the 15-year period beginning with the month in which the                    
          intangible was acquired is applicable, if an appropriate election           
          is made, for acquisitions after July 25, 1991.  See Omnibus                 
          Budget Reconciliation Act of 1993, Pub. L. 103-66, sec.                     
          13261(g)(2) and (3), 107 Stat. 540, as amended by the Small                 
          Business Job Protection Act of 1996, Pub. L. 104-188, sec.                  
          1703(1), 110 Stat. 1875.                                                    




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