Adshead v. Commissioner
United States Tax Court
A corporation sold its assets as a going concern pursuant to a plan of complete liquidation under sec. 337. A separate provision in the contract for sale provided that the corporation and its sole shareholder would not compete with the buyers for a period of 10 years. The contract allocated $250,000 of the purchase price to the covenant which was executed by both the corporation and its sole shareholder. Held: The covenant has a basis in economic reality.
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A corporation sold its assets as a going concern pursuant to a plan of complete liquidation under sec. 337. A separate provision in the contract for sale provided that the corporation and its sole shareholder would not compete with the buyers for a period of 10 years. The contract allocated $250,000 of the purchase price to the covenant which was executed by both the corporation and its sole shareholder. Held: The covenant has a basis in economic reality. The portion of the purchase price attributable thereto is therefore amortizable by the purchaser and is taxable to the seller as ordinary…
1Opinion of the Court
VERONICA ADSHEAD, Transferee, ET AL. 1, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Adshead v. Commissioner
Docket Nos. 3263-72, 2399-74, 2430-74
United States Tax Court
T.C. Memo 1976-196; 1976 Tax Ct. Memo LEXIS 208; 35 T.C.M. (CCH) 843; T.C.M. (RIA) 760196;
June 17, 1976, Filed; as amended Oct. 21, 1976; reconsideration granted
A corporation sold its assets as a going concern pursuant to a plan of complete liquidation under sec. 337. A separate provision in the contract for sale provided that the corporation and its sole shareholder would not compete with the buyers for a period…
2Cases cited27 opinions
- Welch v. HelveringSupreme Court of the United States · 1933
- Cohan v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1930
- American Automobile Assn. v. United StatesSupreme Court of the United States · 1961
- Estate of Horvath v. CommissionerUnited States Tax Court · 1973
- Schulz v. CommissionerCourt of Appeals for the Ninth Circuit · 1961
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