R. William Becker and Mary Ann Becker - Page 18

                                       - 18 -                                         
          Better Beverages, Inc. was decided before October 1, 1991, it is            
          binding precedent in the Eleventh Circuit.  See Bonner v. City of           
          Prichard, 661 F.2d at 1207.  Additionally, the Tax Court applied            
          the mutual intent test in Jorgl, which was affirmed by the                  
          Eleventh Circuit in an unpublished per curiam opinion.  See Jorgl           
          v. Commissioner, T.C. Memo. 2000-10.  In Jorgl, we stated that we           
          would not apply the strong proof rule or the Danielson rule, see            
          infra, when a contract failed to make an allocation of purchase             
          price to a covenant not to compete or did so in an ambiguous                
          manner.  Jorgl v. Commissioner, supra.  Instead, we stated that             
          the taxpayer must establish, by a preponderance of evidence, that           
          respondent’s deficiency determination is erroneous, with the                
          threshold inquiry being “whether the parties mutually intended              
          that an allocation of the purchase price be made to the covenant            
          at issue”, citing Better Beverages Inc. v. United States, supra             
          at 430.  Id. If such mutual intent is found,                                
               courts then proceed to evaluate whether an allocation                  
               comports with “economic reality”.  * * *  An allocation                
               will generally be given effect where “the covenants had                
               independent economic significance such that * * * [the                 
               Court] might conclude that they were a separately                      
               bargained-for element of the agreement.”                               
          Jorgl v. Commissioner, supra (quoting Peterson Mach. Tool, Inc.             
          v. Commissioner, 79 T.C. 72, 81 (1982), affd. 54 AFTR 2d 84-5407,           
          84-2 USTC par. 9885 (10th Cir. 1984)).                                      








Page:  Previous  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  Next

Last modified: May 25, 2011