Excerpt from Practical Guidance

A Look At Tax Treatment Of Noncompetes In M&A: Part 1

By Peter Miller (December 21, 2021, 6:16 PM EST) -- This two-part article discusses, from a tax perspective, the value of covenants that restrict a seller of business assets from competing against the purchasing party. It also describes the tax implications tied to such agreements and to goodwill, which is complementary to rights the seller surrenders in a noncompete agreement as part of the overall deal.

The allocation of value to intangible assets is largely a subjective exercise: Accordingly, the judgment of parties deciding upon such allocations can be prone to challenges because of significant tax implications that may impact the merits of the deal to one party or the other....

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