covenant not to compete


Also found in: Acronyms.

covenant not to compete

n. a common provision in a contract for sale of a business in which the seller agrees not to compete in the same business for a period of years or in the geographic area. This covenant is usually allocated (given) a value in the sales price. (See: covenant)

References in periodicals archive ?
Particularly fatal to the taxpayer's argument before the court was the covenant not to compete.
46,338(M) January 22, 1990) the Tax Court upheld the sale of a corporate business where only 11% of the total amount paid was allocated to the corporate stock and 89% was allocated to deductible consulting fees and a covenant not to compete.
When filing his individual tax return, the seller ignored the purchase price allocation to the covenant not to compete set forth in the purchase agreement and treated the entire proceeds as a capital gain on his return.
Frequently, a portion of the lump sum purchase price is allocated to the covenant not to compete.
46 per share, in expenses related to management and covenant not to compete agreements, $0.
A portion of O's payments were for a covenant not to compete under the agreement.
The value of a covenant not to compete is most often determined under the income approach; the specific amount is based on the cash flow that would be lost if the covenant did not exist and the seller could compete with the buyer.
31, 1998, the company derived fee income of approximately $2,413,000 as non-cash in nature, reflects elimination of the remaining balance of the goodwill and the covenant not to compete from the NYPF Business Combination (the "Impairment Chssified as a charge of approximately $197,000 foaccepted accounting principles ("GAAP"), but ra or construed as having greater importance than, GAAP operating income or cash flows from operations as a measure of an entity's performance.
23 (2001), the Tax Court held that a company had to amortize a covenant not to compete that was entered into in conjunction with a redemption of its stock over 15 years.
Pursuant to the Agreement, T acquired A's goodwill and A entered into a covenant not to compete in connection with the sale of goodwill in exchange for a monthly payment.
Also, Swift paid $1 million to the principal shareholder of DTI in exchange for a covenant not to compete.

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