Only one copy of the letter was mailed. The Office of Assistant Regional Commissioner, Appellate, Philadelphia region, was notified of the death of Helen prior to March 22, 1960, at a time when that office had jurisdiction to issue a statutory notice of deficiency, although the office of the district director of internal revenue, Philadelphia, Pennsylvania, was not so notified. No notice of the existence of a fiduciary relationship was given to the district director pursuant to section 6903 of the 1954 Code, ² and no notice that separate residence had been established was given to the district director pursuant to section 6212(b)(2) of the Code, prior to March 22, 1960.

ULTIMATE FINDINGS.

Respondent issued a valid statutory notice of deficiency under section 6212(a) to petitioners on March 22, 1960.

The covenant not to compete, contained in the agreement1962 U.S. Tax Ct. LEXIS 164">*180 of December 26, 1956, was incidental to the sale of Edward's business and is nonseverable from goodwill transferred.

Amounts received by Edward in 1956, 1957, and 1958 pursuant to his agreement dated December 26, 1956, with Educators constitute gain from the sale of a capital asset.

OPINION.

Petitioners contend that this Court lacks jurisdiction because the notice of deficiency issued by respondent was invalid. The basis for this contention is that inasmuch as respondent's delegate had notice of Helen's death prior to the date the notice of deficiency was issued, this constituted notice that separate residences had been established for Edward and Helen, that under section 6212(b)(2) respondent was required to mail duplicate originals of the notice of deficiency both to Edward and to the estate of Helen, that since only the original was mailed, jointly addressed, it is impossible to determine to which party it was mailed, and hence no notice at all was mailed, and this Court lacks jurisdiction. In addition to the fact that there is no claim that respondent's failure to send duplicate originals of the notice of deficiency 37 T.C. 1161">*1168 resulted in any detriment to petitioners, who filed1962 U.S. Tax Ct. LEXIS 164">*181 a timely petition herein, cf. Clement Brzezinski, 23 T.C. 192">23 T.C. 192 (1954), Alma Helfrich, 25 T.C. 404">25 T.C. 404 (1955), we find no merit in this contention.

Section 6212(a) provides that if the Secretary or his delegate determines that there is a deficiency in tax he is authorized to send notice of such deficiency to the taxpayer by certified or registered mail. Section 6212(b)(2)³ provides that in case a joint return is filed by husband and wife, the notice of deficiency may be a single joint notice, except that if the Secretary or his delegate has been notified that separate residences have been established, a duplicate original of the joint notice shall be sent to each spouse at his last known address. Section 301.6212-1(b)(2), Proced. and Admin. Regs., provides that the notice of separate residences should be addressed to the district director for the district in which the joint return was filed. The history and purpose for this provision is set out in Alex H. Davison, 13 T.C. 554">13 T.C. 554 (1949).

1962 U.S. Tax Ct. LEXIS 164">*182 There is no showing that either Edward or Helen ever notified the district director that separate residences had been established. In fact separate residences were never established. Helen simply ceased to have a residence on her death. A literal application of the statute does not require the mailing of duplicate originals of the notice of deficiency. Nor do we find anything in the history or purpose of the statute which would suggest that we construe notice of the death of one of the spouses given in some manner to the assistant regional commissioner, appellate, as being notice to the district director that the spouses had established separate residences. In fact, section 6212(b)(1), which provides that absent notice to the district director pursuant to section 6903 of the existence of a fiduciary relationship the notice of deficiency shall be mailed to the taxpayer at his last-known address, even though such taxpayer is deceased, would imply the contrary. The obvious purpose of Congress in providing for duplicate notices for each spouse where each maintains a separate residence was to provide assurance that each spouse, being jointly and severally liable for the tax due when1962 U.S. Tax Ct. LEXIS 164">*183 they have filed a joint return, would be informed of the determination of a deficiency and have the opportunity to act in his own behalf. Both petitioners here were so informed and did act by filing a joint petition in this Court. Absent notice that a fiduciary had been appointed for Helen's estate and that there was a separate address for Helen or her estate, respondent was not required to send duplicate notices of deficiency.

37 T.C. 1161">*1169 Petitioners' reliance on certain language in Dudley H. Bryant, 33 T.C. 201">33 T.C. 201 (1959), taken out of context, is misplaced.

We hold that the notice of deficiency was valid and the Court has jurisdiction with respect to both petitioners.

Turning to the merits, the only remaining issue is whether the $ 35,000 received by Edward pursuant to the "Agency Termination and Business Purchase Agreement" with Educators represents gain from the sale of a capital asset or ordinary income. Respondent, in support of his determination that the $ 35,000 was ordinary income to Edward, argues that considering the substance, not the form, of the transaction, the entire $ 35,000 represented consideration either for Edward's covenant not to1962 U.S. Tax Ct. LEXIS 164">*184 compete or for his agreement to enter into Educators' employ; and also that Edward had no vendible goodwill.

First, we agree with respondent that the employment contract and the termination and sale agreement were both a part of the same transaction, that in negotiating and consummating the transaction both parties understood that as a part of the deal Edward would become an employee of Educators. However, this does not mean that the price agreed upon for the sale of the business was in any way related to or a part of the compensation arrangements agreed upon in the employment contract.

The evidence is clear and uncontradicted that neither Edward nor Educators placed any independent value on the covenant not to compete, and we can ascribe none to it. The individual who negotiated the agreements for Educators testified that the company had had considerable experience with such covenants and had never been able to collect on one, so he did not ascribe any independent value to the covenant. The fact that the parties clearly contemplated that as a part of the transaction Edward would become an employee of Educators also indicates that little thought was given to the covenant not to1962 U.S. Tax Ct. LEXIS 164">*185 compete. Any value the covenant might represent to Educators was too remote to be separable from the other property and rights acquired. The covenant was an integral part of the termination and sale agreement giving Educators some additional assurance that it would have the maximum opportunity to profit from the business it was purchasing. George J. Aitken, 35 T.C. 227">35 T.C. 227 (1960); Merle P. Brooks, 36 T.C. 1128">36 T.C. 1128 (1961); Aaron Michaels, 12 T.C. 17">12 T.C. 17 (1949). It was nonseverable from the goodwill transferred and no part of the $ 35,000 is allocable to it. George H. Payne, 22 T.C. 526">22 T.C. 526 (1954). Compare Gazette Telegraph Co., 19 T.C. 692">19 T.C. 692 (1953), affd. 209 F.2d 926 (C.A. 10, 1954).

Respondent's contention that the $ 35,000 was consideration for Edward's agreement to enter into the employ of Educators is likewise unsupported by the evidence or by reason. The evidence is clear that 37 T.C. 1161">*1170 Edward's salary was negotiated and agreed upon by the parties, that it would continue only so long as Edward remained an employee1962 U.S. Tax Ct. LEXIS 164">*186 of Educators and was guaranteed only for 1 year, and that although Edward offered to enter into a 5-year employment contract, Educators refused to do so. It does not stand to reason that Educators would pay $ 35,000 as a bonus to Edward for entering into an employment contract calling for a salary of $ 15,000 for 1 year while simultaneously refusing to employ him at that salary for a 5-year term. Furthermore, the $ 15,000 salary agreed upon was consonant with Edward's reported net income from his insurance business in 1956, and there is no evidence that the $ 35,000 was paid for anything other than those things stated in the termination and sale agreement. The evidence all indicates that the agreements were entered into between unrelated parties negotiating at arm's length, and that the written agreements represent the actual agreements of the parties.

In our opinion, no part of the $ 35,000 was paid either as consideration for Edward's entering into the employment contract or as additional compensation to Edward.

Respondent's principal argument seems to be that the $ 35,000 was not paid for goodwill because Edward had no vendible goodwill and therefore it must have been paid for1962 U.S. Tax Ct. LEXIS 164">*187 something else which would be ordinary income. In 35 T.C. 227">George J. Aitken, supra, this Court held that where a fire and casualty subagent transferred to his employer, an insurance agent, "all the insurance that the [subagent] solicited and sold" while employed by the purchaser, such was the sale of "insurance expirations" which, whether referred to as "trade secrets or confidences, customer lists, goodwill, or just intangibles in the nature of goodwill," constituted capital assets and the amount received therefor was capital gain. In Malcolm J. Watson, 35 T.C. 203">35 T.C. 203 (1960), wherein the Court referred to goodwill, as viewed from the transferee's standpoint, as "an opportunity to succeed to the advantageous position of his predecessor," we held that an accountant had vendible goodwill which when sold represented capital gain. This Court has on other occasions recognized the existence of vendible goodwill in professional practices. Herbert M. LaRue, 37 T.C. 39">37 T.C. 39 (1961); 36 T.C. 1128">Merle P. Brooks, supra;Richard S. Wyler, 14 T.C. 1251">14 T.C. 1251 (1950); Rodney B. Horton, 13 T.C. 143">13 T.C. 143 (1949).1962 U.S. Tax Ct. LEXIS 164">*188 We think the evidence in this case brings it within the rationale of those cases.

Respondent attempts to distinguish the Aitken case on the ground that the insurance involved there was fire and casualty insurance, which is sometimes written for terms of 3 to 5 years so that the expirations, according to respondent, are more valuable, and on the ground that the agency contract provided that the subagent owned the expirations, while the contract here involved is silent on the matter.

37 T.C. 1161">*1171 We see no reason why the "expirations," or whatever they may be called, on Edward's special risk insurance business were any less valuable to the purchaser of that business than were the expirations involved in the Aitken case. ⁴ The evidence shows that the special risk insurance sold by Edward was usually issued for periods of less than 1 year and was often seasonal. Edward's records contained information with repect to when his customers would need insurance, for what period of time, and the type of insurance needed. True, some of this information might be obtainable from Educators' files if a careful review was made of all policies written by Edward, but this would take considerable1962 U.S. Tax Ct. LEXIS 164">*189 time and undoubtedly would not be as complete as the information Edward had. Furthermore, the same thing is true of the fire and casualty insurance involved in the Aitken case. Edward's records also contained correspondence with the insureds and with insurance brokers who referred business to Edward, memoranda made by Edward of meetings with different clients and brokers, and the names of the persons to contact in organizations to whom he sold insurance, which information was not available in Educators' files.

Edward had undoubtedly built a reputation both for himself and for Educators' special risk insurance policies both with his customers and with brokers who did not write this type insurance themselves. Certainly the ability, personality, integrity, and acquaintances of any individual selling insurance is important in whatever field of insurance it is. While these1962 U.S. Tax Ct. LEXIS 164">*190 may be personal characteristics of the individual which help him build up his clientele, they also generate confidence in his customers in the product which he sells which will, at least initially, give his successor in the business a considerable advantage over his competitors.

All of these tangible and intangible assets, whatever they may be called, go into what is commonly considered goodwill, 13 T.C. 143">Rodney B. Horton, supra, and together they constitute a capital asset that is vendible because with it the purchaser is in a much better position competitively to continue the business. 35 T.C. 203">Malcolm J. Watson, supra. Of course this goodwill was more valuable, or at least of more certain value, to Educators when coupled with an employment contract with Edward, but that does not mean that the value of the goodwill must be considered a part of Edward's compensation. The parties apparently bargained in good faith over each contract and between them put a price tag on the value of the goodwill on the one hand and the value of Edward's services on the other hand. We will not presume to rewrite their contracts for them without convincing1962 U.S. Tax Ct. LEXIS 164">*191 evidence that 37 T.C. 1161">*1172 the written contracts do not represent the true agreements of the parties.

But respondent argues that the goodwill, and particularly the expirations, were not Edward's to sell; that absent contractual provisions to the contrary, a general rule of agency applies which makes it the duty of an agent both before and after termination of the agency not to use or communicate information acquired by him during the course of his agency; and that this general rule has not been modified in the field of special risk insurance by custom or by the so-called American Agency System. Even if the general rule is applicable, the fact that an agent may not use information acquired by him during the agency, while possibly making such information less valuable to him, does not necessarily make it of less value to a purchaser who is in a position to acquire and use it.

It is not clear from our rather cursory examination of the Pennsylvania law whether the American Agency System, under which an agent appears to have somewhat greater rights upon termination of his agency than under the general rule, would be applied to this type of an agency agreement. The only two Pennsylvania1962 U.S. Tax Ct. LEXIS 164">*192 cases on the subject to which our attention has been directed, Massachusetts Bonding & Ins. Co. v. Johnston & Harder, 348 Pa. 512">348 Pa. 512, 35 A.2d 721 (1943), and McGough v. Morgret, 17 D. & C. 2d 559 (Pa. 1958), do indicate that the Pennsylvania courts at least recognize the right of an agent to use his "expirations" mutually with the principal upon termination of the agency. So even though Edward may not have had the exclusive right to use his "expirations," this does not mean that Educators would not have paid him anything for what rights he did have. It is quite plausible that Educators would have been willing to pay Edward for whatever interest he did have in the "expirations," absent any certainty that Edward had no rights in them. Proof that Edward did not have exclusive rights to the "expirations" would only be evidence to consider in determining whether the $ 35,000 was actually paid for "expirations" and goodwill or something else.

The agency contract between Edward and Educators was silent with respect to "expirations." However, it did contain a termination clause which provided that upon termination1962 U.S. Tax Ct. LEXIS 164">*193 of the contract the agent would return to Educators all policy forms, blanks, supplies, and property which it had furnished for transaction of business. Had Educators wanted to make certain of its exclusive right to expirations it could have done so in this clause of the contract. The agency termination agreement provided that Edward sold, assigned, and transferred to the company all rights which he had or might have in and to Educators' business solicited or written by him on or before December 31, 1956 "(including expiration and other records, good will, rights to 37 T.C. 1161">*1173 renewal commissions, and any other items in which Kenney might be considered to have any property or interest)," for $ 35,000. This sum was to be paid to Edward's wife or to his estate in the event he died before the entire amount was paid. The latter provision alone makes it very doubtful that the $ 35,000 was paid as a bonus for entering into a contract of employment or for future services to be rendered, neither of which would be of any value in the event of Edward's death; instead it suggests that the $ 35,000 was paid for something then in existence and from which Educators would profit even if Edward1962 U.S. Tax Ct. LEXIS 164">*194 should die.

We find nothing in this record to convince us that the $ 35,000 was paid for anything other than stated in the contract. Those things consisted of records, goodwill, and intangibles in the nature of goodwill, and were capital assets. 35 T.C. 227">George J. Aitken, supra;12 T.C. 17">Aaron Michaels, supra.Petitioners' gain thereon was gain from the sale or exchange of capital assets.

D. K. MacDonald, 3 T.C. 720">3 T.C. 720 (1944), relied on by respondent, is factually distinguishable. There the Court found that the only value the business of a liquidating corporation had, in addition to its tangible assets, was due to the personality and personal ability of its principal stockholder, which the corporation did not own, and that the corporation therefore had no goodwill.

In order to reflect other adjustments conceded by the parties,

Decision will be entered under Rule 50.