Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Before Torruella, Circuit Judge, Souter, *fn1 Associate Justice, and Boudin, Circuit Judge.

TORRUELLA, Circuit Judge. The present appeal requires us to determine whether a covenant not to compete, entered into in connection with the acquisition of a portion of the stock of a corporation that is engaged in a trade or business, is considered a “section 197 intangible,” within the meaning of I.R.C. § 197(d)(1)(E), regardless of whether the portion of stock acquired constitutes at least a “substantial portion” of such corporation’s total stock. For the reasons stated below, we answer in the affirmative.

Petitioners-Appellants Recovery Group, Inc. (“Recovery Group”) and thirteen individuals who held shares in said corporation appeal the United States Tax Court’s decision in Recovery Group, Inc. v. Comm’r of Internal Revenue, T.C. Memo 2010-76, 99 T.C.M. (CCH) 1324 (U.S. Tax Ct. Apr. 15, 2010), which found in favor of respondent Commissioner of Internal Revenue (the “Commissioner”) concerning the correctness of certain income tax deficiencies assessed by the United States Internal Revenue Service (the “IRS”) against the appellants.*fn2 These deficiencies resulted from the finding that a certain covenant not to compete — entered into by Recovery Group in connection with the redemption of 23% of the shares of a former shareholder — constituted a “section 197 intangible,” and, consequently, that Recovery Group had to amortize the payments it made under such covenant not to compete over the fifteen-year period prescribed by I.R.C. § 197(a), and not over the duration of the covenant, as Recovery Group had reported in its corresponding income tax returns. Because we find that the aforementioned covenant not to compete was an “amortizable section 197 intangible,” we affirm.

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.

More From ALM

Premium Subscription

With this subscription you will receive unlimited access to high quality, online, on-demand premium content from well-respected faculty in the legal industry. This is perfect for attorneys licensed in multiple jurisdictions or for attorneys that have fulfilled their CLE requirement but need to access resourceful information for their practice areas.
View Now

Team Accounts

Our Team Account subscription service is for legal teams of four or more attorneys. Each attorney is granted unlimited access to high quality, on-demand premium content from well-respected faculty in the legal industry along with administrative access to easily manage CLE for the entire team.
View Now

Bundle Subscriptions

Gain access to some of the most knowledgeable and experienced attorneys with our 2 bundle options! Our Compliance bundles are curated by CLE Counselors and include current legal topics and challenges within the industry. Our second option allows you to build your bundle and strategically select the content that pertains to your needs. Both options are priced the same.
View Now

The Asia Legal Awards (ASLA) 2022

June 29, 2022
Hong Kong

Where the region's top lawyers, law firms and in-house teams will gather to celebrate their most stellar achievements of the year.

Learn More

Pennsylvania Legal Awards 2022 (PALA)

June 29, 2022

The Legal Intelligencer honors lawyers leaving a mark on the legal community in Pennsylvania with their dedication to law.

Learn More

Elite Trial Lawyers 2022 (ETL)

July 14, 2022
New York, NY

The National Law Journal Elite Trial Lawyers recognizes U.S.-based law firms performing exemplary work on behalf of plaintiffs.

Learn More

Commercial Finance Associate (Flexible location)

Duane Morris LLP seeks two commercial finance associates to join its strong and growing 190+ lawyer Corporate Practice Group. The ideal cand...

Apply Now ›

Commercial Litigation Associate

Duane Morris LLP has an opening in its San Francisco office for a commercial litigation associate to join its team. The ideal candidate wil...

Apply Now ›

Labor & Employment Associate- California

Labor & Employment Associate (4-5 years of experience)HANSON BRIDGETT LLPNorthern California: San Francisco Bay Area, Sacramento AreaFle...

Apply Now ›



Raynes & Lawn is proud to congratulate Harold I. Goodman on the prestigious honor of Lifetime

View Announcement ›



IN MEMORIUM: With a profound sense of sadness, McCormick & Priore announces that Harry A Short, Jr., a preeminent products liability defense lawyer in Philadelphia with a career that spanned over sixty-five (65) years, passed away on June 14, 2022.

View Announcement ›



Starr Gern Davison & Rubin, PC. Attorneys at Law are pleased to announce that SHELLEY L. STANGLER, ESQ. has joined the firm as of Counsel.

View Announcement ›