Recovery Group, Inc. v. Comm'r
United States Tax Court
Recovery Group, Inc. (RG), an S corporation, redeemed all of the stock held by E, a minority shareholder and employee. In addition to paying E for his 23-percent interest in the company, RG also paid E $ 400,000 to enter into a 1-year covenant not to compete. RG deducted the cost of the covenant not to compete over its 12-month term.
Read the full summary
Recovery Group, Inc. (RG), an S corporation, redeemed all of the stock held by E, a minority shareholder and employee. In addition to paying E for his 23-percent interest in the company, RG also paid E $ 400,000 to enter into a 1-year covenant not to compete. RG deducted the cost of the covenant not to compete over its 12-month term. The IRS determined that RG could not immediately deduct the covenant not to compete and determined built-in gains taxes under I.R.C. sec. 1374 and accuracy-related penalties for RG under I.R.C. sec. 6662. The disallowed deductions increased the taxable income…
1Opinion of the Court
RECOVERY GROUP, INC., ET AL., 1 Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Recovery Group, Inc. v. Comm'r
Nos. 12430-08, 29314-07, 29321-07, 29326-07, 29333-07, 29335-07, 29336-07, 29385-07
United States Tax Court
T.C. Memo 2010-76; 2010 Tax Ct. Memo LEXIS 84; 99 T.C.M. (CCH) 1324;
April 15, 2010, Filed
Recovery Group, Inc. (RG), an S corporation, redeemed all of the stock held by E, a minority shareholder and employee. In addition to paying E for his 23-percent interest in the company, RG also paid E $ 400,000 to enter into a 1-year covenant not to compete. RG deducted the cost of…
2Cases cited26 opinions
- Welch v. HelveringSupreme Court of the United States · 1933
- Freytag v. CommissionerSupreme Court of the United States · 1991
- HIGBEE v. COMMISSIONER OF INTERNAL REVENUEUnited States Tax Court · 2001
- Indopco, Inc. v. CommissionerSupreme Court of the United States · 1992
- United States v. BoyleSupreme Court of the United States · 1985
21 more not listed; retrieve them via the Exa API.
3Cited by1 opinion
- Recovery Group, Inc. v. CommissionerCourt of Appeals for the First Circuit · 2011