Able Corporation is a manufacturer of electrical lighting fixtures. Able is currently negotiating with Ralph Johnson, the owner of an unincorporated business, to acquire his retail electrical lighting sales business. Johnson's assets that are to be acquired include the following:

Mr. Johnson indicates that a total purchase price of $1,000,000 in cash is warranted for the business because of its high profitability and strategic locations and Able has agreed that the business is worth $1,000,000. Despite the fact that both parties attribute the excess payment to be for goodwill, Able would prefer that the $600,000 excess amount be designated as a 5-year covenant not to compete so that he can amortize the excess over a 5-year period.
You are a tax consultant for Able who has been asked to make recommendations as to the structuring of the purchase agreement and the amounts to be assigned to individual assets. Prepare a client memo to reflect yourrecommendations.

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FM $50,000 100,000 100.000 Adjusted Basis Assets Inventory of electrical fixtures Store buildings Land Equipment: 7-year recovery period Equipment: 5-year recovery period Total S30,000 80.000 40.000 30,000 60,000 240.000 50,000 100.000 400.000