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disallowed by respondent. Petitioner's other connections to
Buddhism and the Nyingma community also attracted low-wage
employees.
Third, to calculate fair market royalty payments for DM's
customer list, AVG used an income approach to estimate the
revenues generated from the customer list during the years in
issue. AVG estimated the number of customers from the list that
were active customers during the years in issue. According to
AVG, revenues from a customer list decrease over time as customer
preferences and financial conditions change. AVG determined a 9-
year useful life for DM's customer list beginning in 1985. AVG
observed that over the 9-year life, a larger percentage of gross
sales from list customers was attributable to petitioner's own
efforts to maintain the customers. Accordingly, it adjusted the
list's value for petitioner's costs to maintain the list. AVG
also assumed that petitioner received the additions and changes
to DM's customer list after 1985 from petitioner's merger with
SMP and attributed new customers and increases in sales to a
particular customer after 1985 to either petitioner's or SMP's
efforts. AVG valued the customer list, based on projected net
profits generated from the list, at $106,433, $86,098, and
$69,117, during the years in issue, respectively.
Although its expert provided a value for the customer list,
respondent asserts that petitioner did not obtain a customer list
from DM under the license agreement. The license agreement and
amendments did not mention the customer list. Nevertheless, DM
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