Payments for the sale of franchise contracts are tax-favored, as shown here.
They can qualify for capital gains treatment. A business sold all of its assets to a third party, including waste management contracts with three municipalities under which it had the exclusive right to collect and dispose of trash in the cities. The seller claimed the contracts were franchises and treated the sales proceeds allocated to the contracts as capital gain. On audit, IRS recharacterized the amounts as ordinary income. Much to the chagrin of the Revenue Service, the Tax Court agreed with the seller (Greenteam Materials Recovery Facility, TC Memo. 2017-122).