I believe we need to clarify a few points:
- The form 8594 can include a covenant not to compete
- Having said that, typically this is a separate agreement between the buyer and seller since it is the seller that is entering into the non compete.
- If the business will continue, and the business is entering into the non compete, then this should be included in Class VI. In addition, you do need to answer question 6 "yes" and then include the information requested with the tax return.
- If the business is not continuing, then as stated previously, this non compete should technically be a separate agreement with the owner; this is the individual who the buyer does not want to compete. This is ordinary income to the seller.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
