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.
