Annabelle Candy Co. v. Commissioner
United States Court of Appeals for the Ninth Circuit
314 F.2d 1 (1962)
Sam Altshuler and Fred Sommers were the sole shareholders of the successful Annabelle Candy Company (Annabelle) (plaintiff). The two shareholders signed an agreement for Altshuler’s purchase of Sommers’s shares for $115,000. The agreement included a covenant barring Sommers from competing with Altshuler for five years. Altshuler and Sommers preliminarily set the $115,000 purchase price before they began discussions over the covenant. The agreement did not allocate any portion of the $115,000 price to the covenant, which was of great value to Altshuler. Altshuler’s bookkeeper unsuccessfully advised Altshuler to include severable consideration for the covenant in the agreement for tax purposes. On the federal tax return for Annabelle, of which he was now the sole owner, Altshuler allocated $80,554.67 of the $115,000 purchase price to the covenant. Altshuler began amortizing this allocation over the covenant’s five-year term. However, the commissioner of internal revenue (commissioner) (defendant) determined that Annabelle was not entitled to the amortization deductions. Annabelle petitioned the tax court for a redetermination, and the tax court ruled in the commissioner’s favor. Annabelle appealed to the United States Court of Appeals for the Ninth Circuit.
Rule of Law
Holding and Reasoning (Barnes, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 705,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.Unlock this case briefRead our student testimonials
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.Learn about our approachRead more about Quimbee
Here's why 705,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 44,400 briefs, keyed to 983 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.