No. 2, 39 T.C. 318, 326 (1962), affirmed per curiam 319 F. 2d 132 (C.A. 4, 1963); Edward A. Kenney, 37 T.C. 1161, 1169 (1962).

In Glenn W. Lucas, Jr., 58 T.C. 1022 (1972), the contract of sale for an accounting practice contained no provision for a covenant not to compete. The seller in Lucas was interested in withdrawing from the practice of accounting and did not desire to compete. No covenant was implied and, consequently, no value was given to it.

Here we have the situation where a selling partner seeks to withdraw from the partnership (Glenn W. Lucas, Jr., supra); where the contract of sale contains a covenant not to compete (Harry A. Kinney, supra); and where no value is assigned the covenant (Annabelle Candy Co., supra). In this type of factual dispute no single factor is determinative. But where, as here, tax-wise parties do not put a value on a covenant not to compete, we are hesitant about assigning a value to it absent a strong showing as to what its value might be. See Reuben H. Donnelley Corp. v. United States, 257 F. Supp. 747, 756–758 (S.D. N.Y. 1966), for a discussion of the difficulty a party will encounter when he seeks to have a court value a covenant not to compete not specifically valued in the agreement. See also Balthrope v. Commissioner, 356 F. 2d 28, 34 (C.A. 5, 1966), where the Court of Appeals said:

No one has to arrange his business affairs to satisfy the tax collector's appetite for revenues. But when a taxpayer has failed to arrange his affairs so as to minimize his taxes, he cannot expect the Court to do it for him nunc pro tuno.

Baldarelli and Shaffer saw no need to value the covenant separately. No credible evidence was offered which would enable us to make an allocation. This, of course, does not render the covenant nugatory. In our judgment Baldarelli was buying the partnership interest of Shaffer because they were no longer compatible in their business venture. The partnership interest was independently valuable to the full extent paid.

Accordingly, we hold that Shaffer correctly reported the income he received as a long-term capital gain and that Baldarelli is not entitled to any of the claimed amortization deductions for the covenant not to compete. To reflect these conclusions,

Decision will be entered for the respondent in docket No. 3338-70.

Decision will be entered for the petitioners in docket No. 3482-70.

RAMON R. SANTIAGO, PETITIONER V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

H, a United States citizen employed in Spain as a civilian by the United States Air Force, and a resident of Spain, was married to W, a Spanish citizen who has no United States residence. The marriage ceremony took place outside Spain. The Civil Code of Spain contains comprehensive community property provisions governing the rights and interests of one spouse in the other's earnings. Held: Explicit provisions of art. 1325 of the Spanish Civil Code render the community property laws therein inapplicable to couples like H and W, and thus no portion of H's earnings belonged to W under Spanish law. H, who filed United States income tax returns without W, was therefore required to report his full earnings on such returns.

Jules G. Korner III, for the petitioner.

Robert D. Grossman, Jr., for the respondent.

The Commissioner determined deficiencies in petitioner's income tax in the amounts of $127.80 and $2,020.38 for the calendar years 1967 and 1969, respectively. Petitioner was a United States citizen who, as a civilian employee of the United States Air Force, worked and resided in Spain; his wife was a citizen and resident of Spain. The sole remaining issue is whether one-half of petitioner's gross income belonged to his wife under Spanish community property law and was therefore not taxable to petitioner.

FINDINGS OF FACT

The parties have stipulated to certain facts and exhibits which are incorporated herein by this reference.

Ramon R. Santiago (petitioner) is a United States citizen who resided in Madrid, Spain, at the time he filed his petition herein. He was born in Rochester, N. Y., in 1917. Both his parents were nativeborn Spaniards, and on two occasions during his youth, when he was 6 years old and again at the age of 11, petitioner's family lived in Spain for periods of about 11⁄2 to 2 years. Petitioner served in the United States Army Air Force from 1943 to 1947 and 1949 to 1953, attaining the rank of captain. Apart from his two extended visits to Spain and his first period of service with the Army, his life until 1949 was spent in Rochester, where he worked for a time at Eastman-Kodak and married an American woman. That marriage was apparently dissolved before 1953, but it resulted in two children, both of whom still reside in Rochester and are over 30 years old.

Following his discharge from the Army in 1953, petitioner visited his father who was then, and is now, living in Spain. His mother is

no longer living. He secured civilian employment with the "controller's office" or "financial division" of the United States Air Force at Madrid, Spain, on September 15, 1954, and he has held the same position ever since, although the controller's office for that branch of the armed services has since been relocated to Torrejon Air Base, about 18 kilometers from Madrid. His current United States civil service grade is GS-11.

On July 29, 1958, petitioner married Amalia Duarte, to whom he is still married. Amalia is a Spanish citizen and has been such since birth. The marriage ceremony took place on the island of Gibraltar, a British colony, and its validity has subsequently been recognized by the Government of Spain.

Petitioner has not lived in quarters furnished by the United States Government since his discharge from the Army in 1953, but the Air Force has provided him with a "quarters allowance" (currently in the amount of $3,000 per year) since the time of his employment by the controller's office in Madrid. During his first few years as an Air Force employee, he lived in hotels in Madrid. After his marriage in 1958, he rented an apartment in Madrid, which he and his wife occupied for 6 months to a year. They then moved to an apartment in Madrid which petitioner purchased. They purchased the furnishings for that apartment and resided there until around 1965, when they sold the apartment and purchased a larger one, also in Madrid, where they still live. They own the furnishings in their current apartment. Approximately a year and a half prior to the trial herein, petitioner purchased a parcel of real estate located about 15 miles from Madrid and measuring about 1,000 square meters. The area in which the property is located is currently undergoing "development," and petitioner intends to build a home on his land whenever he acquires sufficient funds.

Petitioner and his second wife have had two children, a son born in 1959 and a daughter born in 1961. Both were born in Madrid. They are citizens of both Spain and the United States and speak both Spanish and English; they attend school at the Torrejon Air Base, where they are given instruction in both languages. Amalia has only a limited knowledge of English and her mother, who also lives with petitioner's family, knows no English at all. The principal language spoken in the household is Spanish.

Petitioner has never applied for Spanish citizenship, nor has he ever voted in a Spanish election or filed a Spanish "income tax" return. He carries a card, issued by Spanish authorities in 1954, identifying him as a member of the United States forces in Spain and he holds a Spanish driver's permit of a kind issued to members of such United States forces. That permit was also issued in 1954, and it is

still valid. Petitioner owns two automobiles, at least one of which is of a Spanish make, and both automobiles carry Spanish license plates. The license plates on one of the cars are part of a numerically sequential block issued some years ago to the United States Air Force.

Petitioner has purchased automobile insurance through a Spanish company. In his application for such insurance, he gave the Torrejon Air Base, where he is employed, as his address. For reasons of personal convenience, he has also used the official base address, with a special "APO” designation, on his United States income tax returns and in his correspondence with the Internal Revenue Service.

During and after the taxable years in issue, petitioner has been authorized by the Air Force to patronize commissaries and theaters operated by the United States military outside of the United States, and he has also been entitled to certain "exchange" privileges. Such benefits were available to certain classes of Americans living abroad who were connected with the United States uniformed services. Petitioner's status as a retired military officer and an American residing in Spain also entitled him to become a nonvoting and associate member of the Torrejon Air Base Officers' Open Mess, which was a kind of eating club. He has been such a member of that club during and since the taxable years in issue, and, in his current capacity as chief of the controller's office at the air base, he regularly reviews the club's accounting practices and procedures.

Petitioner has done considerable traveling outside Spain. He holds a currently valid United States passport, which was issued in 1969 at Frankfurt am Main, Germany. The passport does not disclose that petitioner had any address in the United States. Petitioner is not required to carry a visa into Spain. He has earned annual leave time as an Air Force employee and certain additional leave time which was available for visits to the United States. Since he has lived in Spain, he has made six or seven trips to the United States, including one to Washington, D.C., for the purpose of testifying at the trial herein and another to Texas for Air Force-sponsored schooling. Each trip was for approximately 2 weeks, and petitioner has drawn upon both types of leave for his visits to this country. On some occasions, the Air Force has provided him with free transportation on military aircraft between Madrid and McGuire Air Force Base in New Jersey, which was in the same region as his original "home of record" at Rochester, but his ultimate destinations in the United States have often been places other than Rochester. Petitioner's second wife has been in this country only on the two occasions when petitioner had his family accompany him here.

Petitioner has no plan to return to the United States presently, and he intends to continue living in Madrid for the foreseeable future. His thinking in this connection has not changed in at least 15 years. He has no home or mailing address and owns no real estate in the United States; he has not voted in this country since 1948; and he has not had a valid United States driver's license for nearly 20 years. He has, however, had investments in securities of United States corporations, and he has dealt in such securities through the Madrid office of an American brokerage firm. He realized dividend income on his United States stockholdings during each of the taxable years in issue, and he sustained a net long-term capital loss in 1967 through sales of certain of those securities.

Petitioner maintains active bank accounts in Fort Worth, Tex., and New York City. The Fort Worth account is a checking account he opened in 1949, when he was stationed in Fort Worth. He has made monthly deposits to it out of his salary and regular withdrawals to pay bills or to purchase Spanish currency. The balance in that account has ordinarily been about $1,000. He maintains a balance of only $300 in the New York account, which is a savings account he uses only when he comes to New York City. The funds in that account earned interest at least during the taxable years in issue. Petitioner's most active checking account, which ordinarily has a balance of about $1,000, is with a bank in Madrid. He had no savings account with a Madrid bank in 1967 or 1969.

Petitioner and his wife timely filed a joint Federal income tax return for 1967, wherein they reported gross income from wages, dividends, and interest and claimed a net long-term capital loss and certain itemized deductions and exemptions. Petitioner, without his wife, subsequently filed an amended return for 1967 as an "unmarried head of household." The amounts of the wages, dividends, and capital loss treated as chargeable to petitioner in that return were one-half of the amounts reported in the original return. Petitioner timely filed a United States income tax return for 1969, also as an "unmarried head of household," and the only item of taxable gross income reported on that return was in an amount equal to one-half of the wages indicated on his accompanying Treasury Form W-2. All of the foregoing returns were filed with the director of international operations at Washington, D.C. The manner in which gross income was reported on petitioner's 1969 return and 1967 amended return reflected advice which he had gotten from Spanish and American lawyers at Torrejon Air Base.

In his notice of deficiency to petitioner in respect of the year 1969, the Commissioner determined that: "Community property benefits are