Kinney v. Commissioner
United States Tax Court
In 1962, P sold his insurance agency. The contract of sale included a covenant not to compete and provided for the transfer of the agency's insurance expirations. No allocation was made in the contract between the amount paid for the expirations and the amount paid for the covenant not to compete.
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In 1962, P sold his insurance agency. The contract of sale included a covenant not to compete and provided for the transfer of the agency's insurance expirations. No allocation was made in the contract between the amount paid for the expirations and the amount paid for the covenant not to compete. Held: (1) Under the circumstances, the covenant not to compete had substantial value, and a portion of the purchase price is allocable to it; (2) the amount to be allocated to the covenant has been determined.
1Opinion of the Court
SimpsoN, Judge:
Tbe respondent determined a deficiency of $49,-200.34 in tbe petitioners’ 1962 Federal income tax. Tbe only issue for decision is what portion, if any, of the amount paid for an insurance agency is allocable to tbe covenant not to compete.
FINDINGS OF FACT
Some of the facts have been stipulated, and those facts are so found. The petitioners, Harry A. and Betty W. Kinney, are husband and wife and maintained their residence in Houston, Tex., at the time the petition was filed in this case. They filed their 1962 j oint Federal income tax return with the district director of internal…
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