O'Dell & Co. v. Commissioner
United States Tax Court
T Corp. purchased an insurance agency and brokerage business from the estate of its deceased owner and thereafter, in accordance with a prior agreement, entered into a contract with the decedent's widow by which she covenanted not to compete with petitioner and agreed also to perform consultation services as required.
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T Corp. purchased an insurance agency and brokerage business from the estate of its deceased owner and thereafter, in accordance with a prior agreement, entered into a contract with the decedent's widow by which she covenanted not to compete with petitioner and agreed also to perform consultation services as required. Held, in the circumstances of this case, the covenant not to compete had independent economic significance, and the payments in respect thereof furnished the basis for deductions by T under sec. 167(a)(1), I.R.C. 1954.
1Opinion of the Court
OPINION
Raum, Judge:
The issue before us concerns the deductibility of payments made by petitioner pursuant to a consultation agreement and covenant not to compete executed in connection with petitioner’s purchase of Butler-IIunt. It is petitioner’s position that the agreed-upon purpose of such payments accurately reflected their economic substance and that petitioner is therefore entitled to deduct those amounts either as a salary expense under section 162(a) (1) 2 or as the amortized cost of the covenant not to compete under section 167(a) (l),3 or as both. Respondent, however, argues that…
2Cases cited23 opinions
- Gregory v. HelveringSupreme Court of the United States · 1935
- Higgins v. SmithSupreme Court of the United States · 1940
- Griffiths v. CommissionerSupreme Court of the United States · 1939
- Ullman v. CommissionerCourt of Appeals for the Second Circuit · 1959
- Hamlin's Trust v. Commissioner of Internal Revenue. Nowel's Estate v. Commissioner of Internal RevenueCourt of Appeals for the Tenth Circuit · 1954
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3Cited by17 opinions
- Hornaday v. CommissionerUnited States Tax Court · 1983
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- Hardware Plus v. CommissionerUnited States Tax Court · 1994
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- Heritage Auto Ctr. v. CommissionerUnited States Tax Court · 1996
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