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 your recommendations . Tax Strategy Problem I13-65 Russ has never recognized any Sec . 1231 gains or losses . In December 2006 , Russ is considering the sale of two Sec . 1231 assets . The sale of one asset will result in a $ 20,000 Sec . 1231 gain while the sale of the other asset will result in a $ 20,000 Sec . 1231 loss . Russ has no other capital or Sec . 1231 gains and losses in 2006 and does not expect to have any other capital or Sec . 1231 gains and losses in 2006 . He is aware that it might be advantageous to recognize the Sec . 1231 gain and the Sec . 1231 loss in different tax years . However , he does not know whether he should recognize the Sec . 1231 gain in 2006 and the Sec . 1231 loss in 2007 or vice versa . His marginal tax rate for each year is expected to be 33 %. Advise the taxpayer with respect to these two alternatives : a . Recognize the $ 20,000 Sec . 1231 loss in 2006 and the $ 20,000 Sec . 1231 gain in 2007 .