Geographic service area, Clyde had worked for many years as

Geographic service area

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Reference no: EM13775545

Clyde had worked for many years as the chief executive of red industries, Inc., and had been a major shareholder. Clyde and the company had a falling out, and Clyde was terminated. Clyde and Red executed a document under which Clyde's stock in red would be redeemed and Clyde would agree not to compete against Red in its Geographic service area. After extensive negotiations between the 2 parties, Clyde agreed to surrender his Red stock in exchange for $600,000. Clydes basis in the shares was $143,000 and he had held the shares for 17 years. The agreement made no explicit allocation of any of the $600,000 to Clyde’s agreement not to compete against Red. How should Clyde treat the $600,000 payment on his 2014 tax return?

Reference no: EM13775545

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