A recent decision of the Court of Appeals for the Eleventh Circuit (Peterson v. Commissioner, 117 AFTR 2d 2016-1815) involved a surprising application of the Danielson rule.
Commissioner v. Danielson (378 F.2d 771 (3d Cir. 1967)), the case that gave rise to the Danielson rule, involved the sale of all of the stock of a company to a purchaser under documents that, at the purchaser’s insistence, included a noncompetition covenant from the selling stockholders and an allocation of the overall purchase price between the shares of stock and the noncompetition covenant. The allocation, if respected, would permit the purchaser to amortize the amount allocable to the covenant, but require the selling stockholders to report ordinary income in the same amount.
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