International Multifoods Corporation and Affiliated Companies - Page 35

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          compete are premised upon the assumption that the competing tax             
          interests of the parties will ensure that the allocation is the             
          result of arm's-length bargaining.  Where the assumption is                 
          unwarranted, there is no reason to be bound to the allocation in            
          the contract.  See, e.g., Patterson v. Commissioner, 810 F.2d               
          562, 570 (6th Cir. 1987), affg. T.C. Memo. 1985-53; Schulz v.               
          Commissioner, 294 F.2d 52, 55 (9th Cir. 1961), affg. 34 T.C. 235            
          (1960); Lemery v. Commissioner, 52 T.C. 367, 375-376 (1969),                
          affd. per curiam 451 F.2d 173 (9th Cir. 1971).  In the instant              
          case, Mr. Suess' memorandum of September 8, 1988, indicates that            
          the interests of Duskin and petitioner were apparently not                  
          adverse as to the allocation of the sale price.  No                         
          representatives from Duskin testified at trial regarding whether            
          Duskin considered the allocation important, and, given Mr. Suess'           
          statements, we suspect that Duskin was unconcerned.  Petitioner,            
          on the other hand, was certainly cognizant of the potential tax             
          consequences of the allocation, because of the obvious impact on            
          the calculation of petitioner's foreign tax credit, as well as              
          the possibility that the transfer of petitioner's trademarks to             
          Duskin would generate a tax in several Asian and Pacific nations.           
               Petitioner's expert witness, Robert F. Reilly,21 valued the            



               21Mr. Reilly was the director of the Valuation Engineering             
          Associates Division of Touche Ross when Touche Ross prepared the            
          allocation that petitioner used in its purchase agreement with              
          Duskin.                                                                     




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