I:10-52 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 include the following:

Assets Adjusted Basis FMV Inventory of electrical fixtures $ 30,000 $ 50,000 Store buildings 80,000 100,000 Land 40,000 100,000 Equipment: 7-year recovery period 30,000 50,000 Equipment: 5-year recovery period 60,000 100,000 Total $240,000 $400,000 Mr. Johnson thinks that a total purchase price of $1 million in cash is warranted for the business because of its high profitability and strategic locations, and Able has agreed.
Despite the fact that both parties agree that the $600,000 excess payment is goodwill, Able would prefer that it be designated as a 5-year covenant not to compete so that he can amortize it 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 your recommendations.