X

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

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
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
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
October 15, 2024
Los Angeles, CA

Join the industry's top owners, investors, developers, brokers & financiers at THE MULTIFAMILY EVENT OF THE YEAR!


Learn More
October 15, 2024
Los Angeles, CA

Law.com celebrates the California law firms and legal departments driving the state's dynamic legal landscape.


Learn More
October 15, 2024
Dallas, TX

The Texas Lawyer honors attorneys and judges who have made a remarkable difference in the legal profession in Texas.


Learn More

We are seeking an attorney with a minimum of four years of experience in transactional work to join our well-established, nationally renowne...


Apply Now ›

The Insurance Adjustment Bureau, Inc., Plymouth Meeting, PA, a respected industry leader seeks an attorney with a minimum of 3-7 years exper...


Apply Now ›

McDermott Law, LLC, a boutique Plaintiffs-focused firm located in the Denver Tech Center, has an opening for a full-time associate attorney....


Apply Now ›