First Circuit rejected the claim of recovery that Section 197 (d) (1) (E) applied only to purchases of shares considered to be important. The history of the legislation shows that Congress is trying to prevent taxpayers from quickly paying some of the costs of buying shares by issuing undervalued stock value and overvaluing alliances not to compete. For example, Congress requested that share purchase agreements be included in the definition of Section 197 intangible assets and be intended for the acquisition of corporate shares and not just 100% of the acquisition, according to the court. 4. Document the situation and authority separately before receiving the FAS 141R assessment or the IRS challenge. As with so many tax matters, documenting a tax officer`s position is very useful in supporting the desired tax treatment. Can the selling shareholder prove that, prior to receiving a FAS 141R review, he took into account the intent of the federal government (z.B. necessary for the transfer of the good incorporatif), the likelihood of an assessment of FAS 141R, which is an essential value of the federal government, and the reasons why the assessment does not correspond to the value of a competitive competition agreement. the probability of successfully defending the position is much higher. Taxpayers and consultants should pay attention to this and document the intent of a non-competition clause at the time of negotiation. In addition, it is important to understand the intended uses and methods of evaluations and evaluations for final purposes before they are enrolled for federal tax purposes.
This does not mean that such an assessment does not reflect the value of a given asset, but that the intent and content of the agreement should control the tax treatment. In Schultz, the Commissioner and the Tax Tribunal found that Confederation, although declared separately on value, was essential to the sale of the goodwill of the business and had no economic value of its own. The court could not establish that confederation did have an independent basis, provided that reasonable men, who really cared about their economic future, could negotiate such an agreement. 294 F. 2d to 55. In other words, in order for the federal government to be considered a waiver of future revenues, it must appear that potential competition from the seller would pose a considerable economic threat to the purchaser, so that the federal state is not associated as a mere tax lie. [Added highlight] In many sales contracts, part of the flat-rate purchase price is allocated to the Confederation, not to competition. An experienced buyer will know very well how best to attribute the purchase value of the transaction concerned and how much of the value goes to the non-competition contract. In a 2010 Tax Court (T.C. Memo (pdf) case, a company paid a former employee $400,000 for a one-year contract without competition. The tax court held that, although it lasted one year, the agreement was an immaterial agreement within the meaning of Section 197 of the Internal Income Code and had to be depreciated over a period of 15 years.
4. Document the situation and authority separately before receiving the FAS 141R assessment or the IRS challenge. As with so many tax matters, it is very useful to document the position of a tax officer to support the desired tax treatment.